Ford Motor Co. said Friday it would cut 35,000 jobs worldwide, close five plants and eliminate four vehicles as part of a massive restructuring drive.
Ford's job cuts include 12,000 blue-collar positions in North America, in addition to 3,000 already eliminated from a total hourly work force of about 115,000 last year.
"It's going to be difficult, and in some cases painful, to turn this company around, but we will turn it around," said Chairman and Chief Executive William Clay Ford Jr.
The long-awaited overhaul plan, for which the world's second-largest automaker said the company would take a charge of $5.7 billion, or $4.1 billion after taxes, against the fourth quarter of 2001, calls for the closure of vehicle assembly plants in Ontario, Canada, in 2003, Edison, New Jersey, in 2004 and St. Louis, Missouri, later in the decade.
It also calls for the shutdown of two parts plants in Ohio and Michigan and major downsizings, including eliminating shifts, at 11 other plants. Two assembly plants, in Cuautitlan, Mexico, and Avon Lake, Ohio, could also close in the future, Chief Operating Officer Nick Scheele said. This would bring to seven the number of plants Ford eventually shuts.
The plan also includes the suspension of bonuses for company managers and the elimination of 401(k) matches for employees.
First Annual Loss Since 1992
The U.S. auto industry has been reeling from the current recession, quality problems, overcapacity, and stiff competition from Asian and European automakers. While all of the Big Three Detroit automakers have shed jobs, Ford has been hit the hardest by the recession and competition. Its share of the U.S. vehicle sales fell to barely over a fifth in 2001.
The industry layoffs added to the hundreds of thousands of U.S. job cuts amid the recession and the wave of bankruptcies and corporate downsizing that escalated after the Sept. 11 attacks on New York and Washington.
Job cuts made outside of North America affected thousands of Ford employees in Europe and South America, Scheele said.
William Clay Ford Jr., the great-grandson of Henry Ford, founder of the company that celebrates its centennial next year, said he would take no salary or bonus as part of the restructuring. He had a net worth estimated two years ago at $185 million, according to the Detroit Free Press newspaper.
Ford and Scheele, along with Chief Financial Officer Martin Inglis, laid out details of a plan that Ford said would restore it to a position in which it can reap $7 billion in annual pretax operating profits by the middle of the decade.
For the current year, the economic outlook was uncertain and Ford would only break even, Inglis said. And he dodged repeated questions about the company's cash flow, saying only that it had "an adequate funding plan to deliver the business plan."
Highlighting its cash needs, Ford said it would raise $3 billion by selling a special class of bonds convertible to Ford common shares, in the third-largest U.S. convertible sale ever.
Ford's contract with the powerful United Auto Workers union, which remains in effect until September 2003, bars plant closings, as does its contract with the Canadian Auto Workers union, which expires this fall.
But the plants targeted for shutdown will only close once the contracts expire. The UAW said it would try to minimize the impact of the cuts on its workers. The Canadian union, however, reacted angrily to the prospect of closing a plant there.
"We're angry, we're frustrated, and we don't accept the logic of this decision," said CAW President Buzz Hargrove.
Fortunes Changed Overnight
The plant closures will cut Ford's total North American production capacity by about 16 percent to 4.8 million vehicles from 5.7 million, Scheele said.
Ford, which has spent $2.6 billion since 2000 on tire recalls and the Firestone tire crisis, is expected to post a net loss of more than $2 billion when it releases its 2001 financial results.
As recently as a year ago, Ford management was hailed by Wall Street under the stewardship of former Chief Executive Jacques Nasser. But Bill Ford, as the family scion prefers to be called, said Ford's fortunes changed overnight, due to a variety of factors including hubris and a failure to recognize the strength of some of its competitors.
"The auto industry is fiercely competitive, and things can change very quickly," Ford said.
Ford's woes didn't sit well with top U.S. credit rating agencies.
Standard & Poor's on Friday revised its outlook for the world's No. 2 automaker to "negative" from "stable," while Fitch downgraded Ford.
Fitch cut the senior debt of both Ford and its financing unit, Ford Motor Credit Co., by one notch to "BBB-plus," its third-lowest investment-grade rating. S&P affirmed the auto giant's ratings, which are "BBB-plus" for senior debt and corporate credit, but warned those may be cut if it starts doubting the company's ability to post break-even profits, before items.
Reuters and the Associated Press contributed to this report.
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