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June 4, 2008
Ford Motor Co. Chief Executive Officer Alan Mulally and his top managers on Thursday will take the next steps toward deciding how many salaried workers the company must involuntarily lay off as it continues downsizing in the face of a brutal U.S. economy.
A final decision - which could slash more than 10 percent of the company's 24,300 white-collar jobs in North America - is expected in the next few weeks, as the automaker aims to swiftly wrap up all the personnel reductions by Aug. 1 and preserve cash it might need for the tough months ahead.
Workers will be offered Ford's standard severance packages, which are based on years of service and other factors, Ford spokeswoman Marcey Evans said.
Ford salaried employees expressed frustration Wednesday.
"People thought we were headed in the right direction," said one engineer with more than 30 years of service at Ford. He and other salaried workers did not want their identities revealed for fear of repercussions. "Everybody is frustrated."
Just a month ago, Ford's management was leading salaried employees to feel energized about the company's future. Ford gave the workers bonuses in March and announced a surprise $100 million first-quarter profit in April. But since then, the auto industry has turned even harsher, the company said, forcing it to act swiftly.
After surviving two gloomy years, in which Ford lost a combined $15.3 billion, many workers told the Detroit Free Press that they believed the bonuses meant the company was on the cusp of a bona fide revival with Mulally's "One Ford" focus.
But last week, Mulally revealed that production cuts and other cost-cutting actions would be necessary to deal with the economy, which has been beset by higher prices for gas and food, by housing and credit crises, by surging prices for steel and other commodities, and low consumer confidence.
In a question-and-answer session posted on Ford's internal Web site late last week - a portion of which the Detroit Free Press reviewed - Mulally also said: "What we know today is that we do not plan to offer voluntary separation packages as we have done in the past."
Though Mulally had never ruled out the possibility of further cuts, some workers said they felt misled.
"It didn't dawn on anyone this was coming," the engineer said.
Another engineer told the Detroit Free Press that "the mood was good last month" before the latest news. Now he said workers are trying to figure out who is going to be faced with pink slips. Many workers are updating their resumes and ramping up their jobs searches.
"The fact there are no buyouts this time is bothering people," he said.
Ford spokesman Mark Truby said the "bonuses that were paid out were based on last year's performance, and any actions that we're taking now in North America, as we said, are a reaction to what we've seen in the rapid deterioration in business conditions in recent weeks."
The second engineer said the latest developments are making him wonder about Ford's chances of surviving in the long term.
"If we can last until the 2010 product shows up, there's a lot of really nice stuff in the pipeline," he said. "That's assuming we can last until then. ... One of the Big Three is not going to make it."
One contract employee wondered where all the cuts would come from.
Ford already has cut more than 11,000 salaried jobs, or 32 percent of the workforce, since 2005.
"It's very slim as to how many they can let go in the engineering department," she said. "There's not a lot of dead weight around here anymore. That's the problem with wondering who's going to keep their jobs."
Several employees in the engineering department were under the belief that Ford's marketing, sales and service operations would have to bear the brunt of the cuts as the automaker tried to develop higher quality cars and trucks at an ever-quickening pace.
The second engineer said that didn't make him feel any more secure.
"You can say there's all these things I'm working on," he said. "But they could always move it around."
He also noted that cutting sales and marketing wasn't much of a solution either, asking: "Are we going to be able to get our message out?"
Despite workers' emotions, Van Conway, managing director of Conway MacKenzie & Dunleavy, a global firm that specializes in helping troubled companies, said Ford is taking the correct actions to preserve cash through the rough period ahead, as any company would. (General Motors Corp. and Chrysler LLC have not announced new job cuts or restructuring plans this year.)
Ford, which obtained $25.45 billion in loans and credits in late 2006, recently said it expects to burn through $16 billion through 2009, up $2 billion from a March estimate.
Last week, Ford said it had $28.7 billion in cash and $11.9 billion in credit available, a total of $40.6 billion.
But if Ford believes that is cutting it too close, Conway said the company should ask the UAW to reopen the 4-year labor contract that was ratified late last year.
The UAW deal saved five plants, employing 7,900 workers, from closure. That included the Louisville Assembly Plant in Kentucky, which builds the Ford Explorer SUV that has fallen in popularity. Also spared were four plants in Michigan: the Rawsonville and Sterling plants, which build powertrain components, and Wayne Stamping & Assembly Plant, which Ford identified as two factories.
In the past week, Mulally has refused to answer direct questions about whether additional plant closures might be needed.
A top UAW bargainer, who did not want to be identified, told the Detroit Free Press on Wednesday that Ford has not asked the union to go back to the table.
But Conway said Ford might need to sit down with the UAW again if the company's survival is on the line.
"If Ford has done everything else they can do, then of course they should do that," he said. "If you've got to cut off your leg to live, everybody does it. It's basic survival."
Conway noted that Ford must make this turnaround plan its last, because it has used all of its assets in its $25.45 billion financing package two years ago. That includes the trademark for the Blue Oval and intellectual property, such as the design and name of the F-150 pickup, the top-selling vehicle in the United States.
"They're betting the farm," Conway said. "The whole key here is to survive" until the U.S. economy recovers.
Ford has been trying to successfully restructure its operations since 2002, after it posted a $5.45-billion loss in 2001. The automaker has lost more than $11 billion since then.
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