DETROIT – Ford Motor Co. (F) is bracing for more restructuring actions, which may include plant closings and additional layoffs, as it tries to stem steep losses in its key North American vehicle operations.
Strong competition, soaring health-care and raw material costs, and a slide in U.S market share forced the second-largest U.S. automaker to slash its profit forecast twice this year. Ford's North American auto operations swung to a pretax loss of $1.21 billion, including charges, in the second quarter.
"The challenge we face isn't a traditional economic downturn," Ford Chairman and Chief Executive Bill Ford Jr. (search) said in an e-mail message to employees this week. "It's a new, rapidly evolving, brutally competitive global marketplace."
The Ford family scion has been holding off-site meetings with a small group of top executives in the last two months to hash out additional cost-cutting moves, a source familiar with the issue told Reuters.
"Any kind of restructuring like this is a very holistic kind of thing where nothing is really sacred," said David Cole, chairman of the Center for Automotive Research (search).
"That may mean the closing of a couple of more plants," Cole said, adding that Ford's aging assembly plant in Wixom, Michigan, could be one likely candidate for closure.
Ford spokesman Oscar Suris said the company will have a plan ready by the end of the year but declined to be more specific. He did not rule out deeper job cuts in Ford's salaried work force or the closing of manufacturing plants.
"There are lots of things that are being discussed," Suris said. "It's a complex business we operate."
An industry source said a major announcement, possibly related to health-care costs for hourly workers, could come as early as September.
Ford and crosstown rival General Motors Corp. (GM) — which is also struggling with high costs — are in talks with the United Auto Workers union to try to slash some health-care benefits for active and retired hourly employees.
GM expects to spend nearly $6 billion in healthcare this year, while Ford estimates spending about $3.5 billion.
The Detroit automakers are also hurting from this year's dramatic slowdown in sales of their profitable mid- and large-size sport utility vehicles amid high gasoline prices. Both have used aggressive discounts, which erode profit margins, to sell down swollen inventories of the unsold SUVs.
Ford, which has said its global automotive business will post a loss this year, announced earlier that it will cut its North American white-collar work force by 8 percent in 2005.
Bill Ford told employees that the previously-announced job cuts are permanent. The company has now started making involuntary job cuts, including some in its public relations department earlier this month.
"We're not downsizing temporarily with the hope that conditions will get better," he said in the email. "We're accelerating our business plan to be competitive in the 21st century."
The great-grandson of founder Henry Ford (search) has been through this before. He orchestrated a financial turnaround when he took the automaker's helm early in this decade, taking the automaker from a $5.45 billion loss in 2001 to a $3.49 billion profit in 2004.
Those steady gains, now on a reverse course, were achieved through a multi-year restructuring program launched in 2002, which included 35,000 job cuts, shuttering about seven North American plants and killing unprofitable vehicle models.
"They are much leaner than they were. But they are not as lean as they need to be in comparison to the market size they have," Cole said.