Ford Motor Co. took an axe to its North American operations yesterday for the second time in four years, with a massive restructuring that includes 1,200 new job cuts in Canada and could lead to Ford falling from its decades-long perch as the second-largest U.S. auto maker.
Chairman Bill Ford, great grandson of company founder and industry pioneer Henry Ford, unveiled “Way Forward,” his company's plan to restore profitability to its operations on this continent, which have been battered by soaring gasoline prices, raging health care inflation and plunging market share.
Mr. Ford and a cadre of senior executives spent several hours outlining some of the details of a plan to close 14 assembly and parts plants and slash 25,000 to 30,000 jobs — including 1,200 by eliminating a shift at an assembly plant in St. Thomas, Ont. — and promised to begin turning a profit in North America by 2008.
But they offered few specifics on how they will generate revenue growth to turn around operations that lost $1.2-billion (U.S.) last year before tax.
“You can't cut your way to success,” Mr. Ford declared, promising that innovation, bold design and vehicles that deliver what drivers want are the keys to reversing the fortunes of the 100-year-old company, which reported a profit yesterday of $2.2-billion for 2005, despite the losses in North America.
“We need to change the business model that has existed for many decades at Ford,” Mr. Ford said. “We must reduce capacity in North America. From now on our products will be designed and built to satisfy customers, not just fill a factory.”
The restructuring starts with the closing of five assembly plants and a reduction in capacity of 1.2 million vehicles a year.
That will reduce Ford's assembly capacity to less than three million vehicles annually, just ahead of the hard-charging No. 3 producer, the Chrysler division of DaimlerChrysler AG, which has the ability to build about 2.8 million vehicles a year.
Chrysler has designs on cranking out 3.5 million cars, trucks, minivans and sport utility vehicles a year by the end of the decade.
Ford identified assembly plants in Atlanta, St. Louis and Wixom, Mich., for closing and said another two plants will be announced later this year.
Eliminating 1,200 jobs in St. Thomas angered Canadian Auto Workers president Buzz Hargrove, who thought last fall when the union agreed on a new contract with Ford that his members had dodged most of the restructuring bullet. (That deal included the closing of Ford's Windsor, Ont., casting plant, which was reaffirmed yesterday.)
The Ford cuts and a plant closing and shift elimination in Oshawa, Ont., announced last November by General Motors Corp. underline a crisis for the industry in Canada, Mr. Hargrove said.
He blamed Japan and South Korea, which he accused of throwing up barriers to vehicles made in North America while companies based in those countries ship here with few restrictions.
“We should restrict their ability to ship from Asia and sell here,” he said.
While Ford stopped short of closing St. Thomas, it left a cloud over the plant and 1,200 workers who will remain on the job once the shift is phased out some time next year.
“The industry doesn't have much of a history of keeping one-shift plants open,” Mr. Hargrove told a news conference in Toronto. Nonetheless, Ford Motor Co. of Canada Ltd. officials told both Mr. Hargrove and the Ontario government that a $200-million (Canadian) investment in the St. Thomas plant will go ahead and that the company is still committed to developing a new engine for its Essex Engine Plant in Windsor, which was on the endangered list prior to CAW bargaining last fall.
Ontario was watching the Ford announcement closely because the government provided $100-million in financial help for a redevelopment of the company's assembly complex in Oakville, Ont. If Ford's employment in Canada drops below 10,000 people, the government can claw money back.
Joe Cordiano, Ontario's Economic Development Minister, said that even with the job losses announced yesterday, Ford's employment in Canada will remain above the 10,000 threshold. Ford now employs about 12,000 in Canada.
A $1-billion Ford investment in Oakville and a $2.5-billion investment by GM in Canada indicate that “if Ford and GM are going to turn things around, they've clearly indicated that Ontario is going to play a leading role.”
Brian Johnson, an analyst with Sanford C. Bernstein, said Ford left key questions unanswered. “Can they defend market share? Can they get early retirements to match the pace of plant closings?” he asked.
With files from Reuters
source: http://www.theglobeandmail.com/servlet/story/RTGAM.20060124.wxford0124/BNStory/Business/ 1feb2006
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