Yesterday, Ford CEO Alan Mulally told the world that he'd downsize the company if needs be. Well, needs be. After revealing that FoMoCo dropped $2.7b in the last financial quarter, the Detroit News reports that the American automaker is offering buyout to ALL of its [remaining] 54k United Auto Workers (UAW) employees. You heard right: Ford is asking every single UAW worker laboring for The Blue Oval Boyz if they'd like to abandon ship. To that end, Ford's sweetened the deal for union members with retirement packages in place. "Workers eligible for retirement will receive a lump-sum payment of $50,000 if they agree to leave the company, plus full retirement benefits. That is $15,000 more than Ford offered to retirement-eligible UAW workers in 2006. Moreover, skilled trades workers, who are among the highest paid, will receive a $70,000 buyout payment, or $35,000 more than the previous offer." Although Henry's Mob doesn't expect everyone to leave, the move paves the way for Ford to hire lower-cost replacements; you know, if they need them. The DetN ends on the usual upbeat note. "'Ford is becoming a smaller company and becoming a lower-cost company at the same time,' said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass. 'You can become profitable by becoming small.'" Ah, but will they? Watch this space.
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Damn. I should have gotten a job with Ford a year ago… then I could quit now and be rich!
I wonder how this will affect negotiations with the CAW. If Ford is likely to do the same thing in Canada, then it’d be unlikely that the CAW will agree to any pay cut for new hires. I can see the CAW striking for quite some time.
wow! i don’t know what’s a sweeter deal: quitting your job at ford or moving to iowa to not grow corn. if any of these guys are smart, they’ll do both.
If enough UAW staffers leave, could Ford hire non-union employees to replace them?
radimus: If enough UAW staffers leave, could Ford hire non-union employees to replace them?
The current contract calls for all assembly line workers to be members of the UAW, so Ford cannot replace departing union workers with non-union workers.
What it can do is replace departing UAW workers with less-expensive UAW workers, because the newest contract permits the hiring of new workers at a lower pay rate.
This looks smart, scaling down production and the company size to meet demand. What I would like to know is are they also going to get rid of the over abundance or execs and management to also make the company smaller. And equal percentage of chiefs need to go along with the indians, especially in the overbloated organization.
A riff on the birth of the Boeing 747: will the last one to leave Dearborn please turn out the lights?
Mulally is actually trying to run Ford as a business vs. a charity…quite refreshing.
Well, in the recent round of UAW negotiations, the union agreed that 20% of its workforce could be hired at a lower wage tier. Well, to start getting people into that lower wage tier, Ford has to shed some jobs first. Many of the targeted 10,000 or so production worker separations will be back filled later with lower wage workers. They don’t need to cut that much more workforce; they need to make it cheaper now.
The earnings call was actually quite good. A one-time charge related to Volvo was the primary reason for the loss ($2.4 bill). Everything else looked fine – revenues were higher, costs were lower, capacity utilization for Q1 is now between 85-90% (up from like 60% just two years ago), cash was stable for the year – $34 billion in cash and an $11 billion credit line. They are loaded. Total restructuring is estimated to cost $12-$14 billion. Even NA saw its automotive operations losses drop from almost $3 billion to just above $1.5 billion. That’s operations only. That’s massive.
I know that everyone will get obsessed with the $2.7 billion number, but, again, $2.4 of that was charges – not operational losses. Profit from operations pre-tax was like $125 million for the year. Total loss exluding special items was about $250 million compared with like $5 billion last year. I’d say Ford is doing very well.
Overall I appreciate Ford’s transparency and willingness to share some of the plans they are executing on, so kudos for that.
Yes, any improvement from last year’s disaster will appear huge. However when all your operating profits come from your finance arm and you can not achieve positive operating cash flow I would say they are not doing very well.
Bleach—Rome wasn’t built in a day…Ford won’t be rebuilt in a day either. Progress is progress.
That said—-Ford’s progress needs to be accelerated….Mulally has been pretty consistent on this one. The next 24 months will tell us if he is successful against this goal.
This is no suprise. I’m suprised Ford even waited for the ink to dry on the new UAW contract to do this. Its a no brainer. Any and all costs they can cut must be cut.
Hey, $50,000 can probably buy you an 8br house in Michigan!
lprocter: if a $30k buyout = rich, then your needs must truly be modest!
Ford North America is in big trouble.
http://media.ford.com/newsroom/release_display_foriframe.cfm?release=27379
In the past, it had two big profit centers-the F Series trucks and the Explorer. F-Series sales were down 13.2% and Explorer sales were down 23.1% for the year.
Overall sales were down 11.9%. They do have some hits (Fusion and Edge and the Lincoln versions of such (and the Mercury Milan)), although the new Taurus is an even bigger dud than the Five Hundred it replaced.
Volvo and Jaguar are also in trouble, especially Jaguar. Of course, those don’t really have anything to do with the UAW, and they are selling Jaguar anyways.
I don’t believe one can shrink to profitability. As far as I know, there has never been a case where a formerly large company became a profitable, successful small company, in any industry, without at least a bankruptcy reorganization first. It’s simply never happened, because too many fixed costs of the company are structured around the company being big and it’s impossible to shrink those costs quick enough to avoid bankruptcy. If anybody can think of an example, I’d love to hear it.
I say give each employee a new Focus, with the stipulation they have to drive it as their primary vehicle; voluntary reductions would ensue and FoMoCo saves money as $35K buys off 2 workers (2 Focii) instead of one.
PS: I like the Focus…the Euro one.
“I don’t believe one can shrink to profitability. As far as I know, there has never been a case where a formerly large company became a profitable, successful small company, in any industry, without at least a bankruptcy reorganization first. It’s simply never happened, because too many fixed costs of the company are structured around the company being big and it’s impossible to shrink those costs quick enough to avoid bankruptcy. If anybody can think of an example, I’d love to hear it.”
Chrysler, Ford, GM, Nissan,… even Toyota had to do this. The reduction of labor and plant capacity is standard fare whenever a manufacturer is in financial trouble.
I’m not talking about number of employees in determining the size of a company. It’s completely possible to run a huge company with very few employees (by contracting everything out). I’m talking about revenues. Toyota is much bigger than it used to be by any measure, especially revenues. The Detroit Three are much smaller than they used to be. Toyota makes ten billion dollars a year, every year. The Big Three sometimes lose more than that.
Nothing wrong about it, Ford , GM, and Chrysler need to reduce their size. Their market share has shrunk to decades they have to as an organization also need to shrink.
There needs to be some more bloodletting at HQ in Dearborn. There are WAY too many upper to middle management types in the FoMOCo organization. This would save some money and get rid of some of the morons that have been running the show.
I don’t believe Apple ever went bankrupt, and yet it shrank to almost nothingness before rising like a Phoenix from the fire.
You might be able to save some money, but unless they are either not morons at all, or really big morons, the morons running the show won’t be getting rid of themselves anytime soon. They run the show.
If I worked there I’d be gone in a millisecond. Take that money and run. Abandon ship cause it’s sinking!
You’ll be kicking yourself when you stay and Ford goes under and you didn’t take that money and get a job at Toyota.