Ford To Cut Up To 30,000 Jobs To Stem North American Losses

Ford to Cut Up to 30,000 Jobs to Stem North American Losses

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Jan. 23 (Bloomberg) -- Ford Motor Co., the world's third- biggest automaker, will close 14 manufacturing facilities and eliminate as many as 30,000 jobs by 2012 after three straight quarters of North American losses.

The closings will include assembly plants in Atlanta, St. Louis and Wixom, Michigan, and two unidentified plants by 2008, the company said in a statement today on PR Newswire. The cuts were announced as part of the "Way Forward'' plan, Chief Executive Officer William Clay Ford Jr.'s second restructuring in four years.

"We will be making painful sacrifices to protect Ford's heritage and secure our future,'' Bill Ford, 48, said in the statement.

Ford announced the plan after recording a pretax loss of $1.6 billion for 2005 at its North American automotive operations. The region accounts for the bulk of the company's automotive revenue and is Ford's largest market. Ford's share of U.S. auto sales fell to 18.6 percent in 2005, down from 19.6 percent the year before and 25.7 percent in 1995.

Ford, of Dearborn, Michigan, has yielded most of its share to Asian competitors such as Toyota Motor Corp. Ford's annual U.S. sales have dropped by more than 1 million units since 1999.

Shares of Ford rose as much as 8.7 percent today after the company reported higher-than-expected fourth-quarter profit of $124 million, or 8 cents a share, compared with a year-ago profit of $104 million, or 6 cents. The results didn't include any costs related to job cutting and closing plants in the Way Forward plan. Ford had full-year profit of $2 billion, or $1.04 a share, down from $3.49 billion, or $1.73 a share, in 2004.

Loss Narrows
The pretax fourth-quarter loss at its North American automotive unit narrowed to $143 million from $470 million a year earlier. The unit had a $907 million pretax loss, excluding one-time costs, in the second quarter, and lost $1.2 billion in the third quarter.

Excluding costs and gains Ford considers one-time items, Ford would have reported a fourth-quarter profit of $511 million, or 26 cents a share, down from $554 million, or 28 cents, a year earlier. On that basis, Ford was expected to report a profit of 1 cent a share, the average estimate of 17 analysts in a Thomson Financial survey.

The quarter included a $1.08 billion pretax gain on the sale of Hertz Corp. car-rental operation to an investor group, writedowns at its U.K.-based Jaguar unit, some cuts of salaried employees in North America and net income of $465 million at Ford Motor Credit Co.

Management Changes
Bill Ford in September reorganized the management of the automaker's Americas unit. Executive Vice President Mark Fields took over the unit, which includes North and South America, Oct. 1 to complete the Way Forward plan. Fields turns 45 tomorrow.

Ford told employees in a Nov. 18 e-mail that it would cut 4,000 salaried jobs by the end of the first quarter as part of the initiative. Those firings began last month. Ford reported $962 million in fourth-quarter expenses for personnel reductions.

Ford joins General Motors Corp. in attempting to shrink North American production as Toyota and other Asian automakers captured a record 36.5 percent of the U.S. market last year. GM Chief Executive Officer Rick Wagoner said Nov. 21 he plans to close nine assembly, stamping and parts plants and eliminate 30,000 U.S. union manufacturing jobs by the end of 2008.

Ford had 122,877 employees in its North American auto operations at the end of 2004, including 35,000 salaried employees. Detroit-based GM, Ford's bigger U.S. rival, had 173,000 U.S. employees in North America at the end of September 2005, down from 181,000 at the end of 2004. GM had 106,000 hourly and 36,000 salaried U.S. employees at the end of September.

If Only
"If Toyota and Honda weren't in the market, Ford and GM would be in fine shape,'' said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said today before the restructuring announcement. "We don't see anything on the horizon that is going to substantially change the slide.''

The plan is Bill Ford's second restructuring since becoming CEO in 2001. Toyota passed Ford, which sold 6.8 million cars and trucks worldwide last year, as the world's No. 2 automaker in 2003. Toyota has said it expects to report 2005 sales of 8.09 million cars and trucks. Wagoner said earlier this month GM sold 9.17 million cars and trucks worldwide last year.

Overcapacity
Ford in 2005 had the capacity to build 4 million vehicles annually in North America at 16 assembly plants. Last year, the company sold 2.95 million of its North American-built Ford, Lincoln and Mercury models in the U.S.

Ford's U.S. sales overall fell 5 percent in 2005 compared with an industrywide gain of 0.5 percent. The company was hurt by a decline in sales of profitable sport-utility vehicles. The Explorer mid-size SUV hit a 15-year sales low in November and fell 29 percent for 2005.

The company's North American car and truck plants operated at 79 percent of capacity in 2005, according to Harbour Consulting of Troy, Michigan. That was the lowest of six automakers surveyed by the consulting company. Toyota was No. 1, with its North American plants operating at 111 percent of capacity.

Ford faced skepticism about the restructuring before today's announcement.

"We've already seen Bill Ford's best shot, and it's not enough,'' said Peter Morici, a professor of international business at the University of Maryland in College Park.

The company's plummeting U.S. market share prompted Moody's Investors Service to cut its rating on Ford Motor Credit Co. debt to junk on Jan. 11. Ford Credit had been the last investment-grade unit. Ford Credit was cut to Ba2 from the lowest investment grade of Baa3. Ford Motor debt was cut two levels to Ba3, dropping further below investment grade.

The move followed a similar rating cut by Standard & Poor's on Jan. 5. S&P cut Ford's rating by two levels to BB-. S&P already had Ford below investment grade. S&P said it had "increased skepticism'' that the automaker could turn around its North American operations.

Ford gained 57 cents, or 7.2 percent, to $8.47 at 10:23 a.m. in New York Stock Exchange composite trading.