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THE NATION

Ford to Cut 35,000 Jobs, Shutter Five Factories

January 12, 2002|TERRIL YUE JONES | TIMES STAFF WRITER

DEARBORN, Mich. — Attempting to reverse its sudden fall from prosperity, Ford Motor Co. said Friday that it will cut 35,000 jobs around the world, close five North American factories and discontinue four models, including the storied Lincoln Continental.

The world's second-largest auto maker hopes the draconian moves will help it recover from myriad problems of the last year, including quality lapses, a slide in productivity, loss of market share to its major competitors and eroded profit. The Firestone tire recall, for example, cost Ford billions, and its last four new models to be launched all were recalled numerous times or delayed because of quality glitches.

The plants to be closed beginning in 2003 are the Edison truck plant in New Jersey, which makes Ranger pickups; the Ontario truck plant in Canada, which produces F-series pickups; the St. Louis assembly plant, which produces Explorer sport-utility vehicles; Cleveland Aluminum Casting; and Vulcan Forge in Dearborn, which produces engine parts that soon will be obsolete.

The closings will reduce Ford's production capacity by about 900,000 vehicles, from 5.7 million to 4.8 million. The massive job cuts include 22,000 positions in North America. Of the 35,000 total cuts, about 15,000 previously had been announced.

In addition to phasing out the luxury icon Continental, Ford said it will discontinue the low-profit-margin Ford Escort, Mercury Cougar coupe and Villager minivan as part of a plan to realize $9 billion in profit improvement by the middle of the decade.

"It's a comprehensive plan, but not a magic wand," Chief Executive William Clay Ford Jr. told more than 300 industry analysts and journalists in this Detroit suburb, where Ford is headquartered.

The program "is based on executing the fundamentals of our business to build great products. It's going to take everyone in the extended Ford family--employees, suppliers and dealers--working together, over time, to make it work," Ford said, standing under a huge sign that read Corporate Revitalization Plan.

Ford, the 44-year-old great- grandson of company founder Henry Ford who has been chief executive for only 10 weeks, said he will forgo his salary in 2002 and perhaps in 2003, until Ford turns around.

Ford and President and Chief Operating Officer Nick Scheele expressed regret at the measures taken, especially the five plant closures. In addition, no new products have been assigned to two other plants: Ohio Assembly, which produced the Villager and the Nissan Quest minivans, and Cuautitlan Assembly in Mexico, which builds smaller vehicles primarily for the Mexican market. Eleven other factories will see major downsizing and shift reductions, and nine plants will undergo line-speed reductions to limit output.

Ford cannot close any U.S. factory until after the current labor contract with the United Auto Workers ends in September 2003. The UAW was informed before Friday's announcement but has little leverage to stop Ford from carrying out its plans.

The UAW issued a statement claiming credit for maintaining union jobs in tight times.

"Because of our contract, Ford has been required to plan its restructuring in a way that respects the seniority rights--including job placement rights, income, pension, health care and many other protections of UAW-Ford members," said UAW Vice President Ron Gettelfinger.

"Although the actions we're outlining today are difficult, they are necessary steps to lead Ford back to a strong financial and competitive position," Scheele said.

First and foremost, Ford must improve its vehicle quality, Scheele said, noting that Ford slipped to seventh place among the top seven auto makers in initial quality, according to May's quality report by J.D. Power & Associates. He pledged to improve on that by the time the next J.D. Power report is released.

Ford lost $692 million in the second and third quarters of 2001 and is expected to finish the year about a billion dollars in the red. The first quarter of 2002 is expected to be the toughest, with subsequent quarters showing gradual improvement, Chief Financial Officer Martin Inglis said.

Analysts, in general, applauded Ford's moves.

"It goes a lot deeper than I had expected," said Burnham Securities auto industry analyst David Healy. "I think the long-term results, for that reason, will probably be greater and the near-term effects are unfavorable. The company is looking at no better than break-even for 2002 despite the $2 billion in savings.

"Ford probably has gotten most of its bad news out of the way," Healy said. "They've written off everything and taken provisions for everything they can see currently to get back to a solidly profitable position in a couple of years."

But Saul Rubin, auto analyst with UBS Warburg, said it was just a beginning.

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