In a huge restructuring following a tumultuous 2001, Ford Motor Co. announced it is laying off 35,000 workers worldwide and closing five plants in North America as it attempts to become profitable again.
But the company's CEO added that the massive cuts alone might not be enough to immediately change the fortunes of the world's second-largest automaker.
"It's a comprehensive plan, but it's not a magic wand," William Clay Ford Jr. said today from Ford headquarters in Dearborn, Mich.
The job cuts include 12,000 manufacturing jobs and 3,500 early-retirement packages — which the company had already announced — for managers. About 22,000 of the cuts are in North America.
Ford intends to close plants in Brook Park, Ohio, by either 2003 or 2004, while plants in Edison, N.J., and Oakville, Ontario, will be shut by 2004. Plants in St. Louis and Dearborn, Mich., will be closed at dates to be determined. The company has 47 plants in North America.
The automaker will also stop production of four car models: the Ford Escort, Mercury Cougar, Mercury Villager and Lincoln Continental.
"We realize that some of the things that must be done will be painful," Ford said. "I can't begin to describe how sorry I am about that."
Reversal of Fortune
The announcement represents a massive reversal in Ford's fortunes. The automaker flourished in recent years, reporting a $6.67 billion profit in 2000, and began 2001 amid talk that it could surpass General Motors as the leading automaker in sales for the first time since the 1930s.
But in a slumping economy, sales declined, while controversies about the safety of the popular Ford Explorer hurt the company, and led tire-maker Firestone to end a decades-old relationship with Ford. The company spent $3 billion to replace Firestone tires last year.
Then-CEO Jacques Nasser also resigned late in 2001.
While financial results for the year as a whole are not in, the company lost $692 million in the third quarter of 2001, and analysts expect Ford to report fourth-quarter losses in a few days.
Like other automakers, the company enjoyed healthy sales figures in the fall with its zero-percent financing programs, but may have hurt its profits in the long run in doing so.
"For most of the last decade the Ford Motor Company was on a roll," Ford said. "The great success we enjoyed may have caused us to underestimate the strength of our competitors."
Winning the Car Buyers Back
The company announced it was taking a $4.1 billion one-time charge to pay for the layoffs and plant closings. The plan also includes the suspension of bonuses for company managers and the elimination of 401(k) matches for employees.
Ford employs approximately 345,000 people worldwide, about half of whom are in North America.
For his part, William Clay Ford says he will take no salary for his work. And in a conference call with analysts and reporters, he said that a turnaround could only come by re-emphasizing the quality of the company vehicles in order to spur sales.
"This is going to be a product-led recovery," said Ford. "I cannot emphasize that enough."