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Ford May Go Deeper With Job Cuts-"Operating Challenges"

Officials Weigh Options To Reduce Excess Capacity,
Speed Up Cost Reductions
By NORIHIKO SHIROUZU
Staff Reporter of THE WALL STREET JOURNAL
July 22, 2005; Page A6
http://online.wsj.com/article/0,,SB112199864723393028,00.html?mod=home_whats_news_us

Ford Motor Co. is looking to make deeper cuts in its North American salaried work force than it has disclosed thus far, and some employees say they have been told reductions over the next few years could eliminate as much as 30% of the current white-collar work force.

A company spokesman declined to comment on specific figures but confirmed management is considering more-aggressive measures to reduce costs that could include further jobs cuts. A cut of 30% of white-collar jobs in the auto maker's North American auto operations would translate into an elimination of about 10,500 salaried positions from the current total of about 35,000.

Ford reported earlier this week a 19% slide in its second-quarter net income and said it will move to accelerate cost-reduction efforts, including cuts in manufacturing capacity. The possibility of deeper cuts at Ford comes amid deepening signs of trouble at the Dearborn, Mich., company and rival General Motors Corp.

Ford is in the fourth year of a turnaround plan. While the company's financial results improved steadily through much of last year, it now appears the plan is being knocked off track by tough competition in the U.S., slumping U.S. sales of sport-utility vehicles and stubbornly rising costs and now quality problems.

Moody's Investors Service, which rates Ford at its lowest investment-grade ranking, is reviewing the ratings for a possible downgrade. Standard & Poor's already ranks Ford and its Ford Motor Credit Co. unit as speculative, or "junk," grade.

Ford spokesman Oscar Suris declined to confirm the company is working on plans to cut the company's white-collar work force by 30%. But when asked about the 30% target, he said that the cuts announced earlier this year were short-term actions, and that the company is hammering out longer-term measures. "We are obviously working on plans. ... We realize we have operating challenges [including] excess manufacturing capacity issues and cost performance issues, and we are going to address them," Mr. Suris said. "We will provide more details when we are ready to share our plans."

Word of potential action comes after Ford's chief financial officer, Don Leclair, indicated earlier this week that there could be more job cuts in addition to an announced reduction of about 2,700 white-collar jobs in North America.

"Nothing is off the table," Mr. Leclair said in a telephone interview Tuesday when asked about proposals that have been shown to some employees to trim the North American salaried work force by almost a third.

According to several people familiar with the job-cut proposals, the 2,700 job cuts announced earlier would go toward the larger goal of reducing white-collar jobs by 30%. The potential cuts were the subject of a state-of-the-company meeting in a manufacturing division last month, according to the individuals familiar with the matter.

Further white-collar job cuts may be a precursor to Ford asking the United Auto Workers union for cuts among blue-collar workers on the manufacturing side of the business. To show that salaried employees are sharing restructuring pains, Detroit auto makers often cut salaried jobs before bringing bad news to the union.

On Tuesday, as part of a conference call with analysts to brief them on Ford's second-quarter results, Mr. Leclair made it clear the auto maker was ready to accelerate cost-reduction efforts, including cuts in manufacturing capacity. "We realize we have excess capacity, and we will update you on our plans later this year," he told analysts.

Still, Ford executives so far have provided few details about how they are going to address problems of excess manufacturing capacity and stubbornly high costs of operations.

Write to Norihiko Shirouzu at [e-mail]