Ford Buyouts Begin, but What's Next?

Nov. 29, 2006 — -- For Roger Beernauert of Brooklyn, Mich., it was a no-brainer.

"It's just time to go," said the 51-year-old United Auto Worker union member and longtime Ford Motor Co. employee. "I'm getting out 10 years earlier than I'd hoped to, but this is an excellent opportunity."

Beernauert is among the 38,000 or so union members that Ford announced today had accepted buyout or early retirement offers from the struggling automaker.

That figure, which represents nearly 46 percent of Ford's 83,000 unionized employees, outpaces the 25,000 to 30,000 target the company had set.

"From a cost perspective, they want more people to take the offer than not," said George Magliano, director of auto industry research at financial analysis provider Global Insight. "But the question becomes: 'Do you lose too many good people?'"

Ford, which has seen years of slumping sales, offered eight buyout packages ranging from $35,000 to $140,000 based on seniority and age of the worker.

Some of the plans provided health insurance, a portion of the worker's pay, and partial payment of college tuition.

"I talked to my family," said Michigan UAW member Carol Howey, who opted for the buyout. "We did all the reasoning, and I talked to a financial adviser."

The company says those who accepted the deals will begin their departures in January.

"While I know that in many cases, decisions to leave the company were difficult for our employees, the acceptances received through this voluntary effort will help Ford to become more competitive," Ford president and chief executive Alan Mulally said in a statement.

16 Ford Plants Closing

At the 16 Ford plants slated for closure by 2012, buyout acceptances appeared to be heavy.

At the St. Paul, Minn., facility -- which makes the Ranger pickup truck and will close its doors in 2008 -- union officials said an estimated three-quarters of the union workers, or about 1,400 to 1,700 members, had signed the deal.

"These cuts are a painful last resort," said former CEO Bill Ford Jr. during the official announcement of the cuts earlier this year. "By taking these actions, we're creating more stable and secure jobs. We all have to change, and we all have to sacrifice."

Ford, the great-grandson of company founder Henry Ford, was replaced by Mulally in September as the automaker's financial troubles continued.

The buyouts and plant closures are expected to save the company $5 billion by 2008 and reduce Ford's so-called "legacy costs," which are crippling.

The costs, which include pensions and health care for workers, retirees and their families, represent an estimated $1,000 for every car sold.

These days, Ford cars just aren't flying off the lot.

Ford, which lost $7 billion in the first nine months of this year, and competitor GM have failed to create new passenger car designs that appeal to American consumers, while Japanese automakers Toyota and Honda have seen sales steadily increase.

"The Ford 500 looks like a Bulgarian limousine from the Soviet era," said University of Maryland economist Peter Morici.

Analysts say that once the legacy and production costs are slashed, the company -- which has seen its market share decline from 26 percent in the early 1990s to 17.6 percent at the end of October -- must focus on making cars that consumers want to buy.

"The financial end, the costs and the buyouts -- that's only one-third of the problem," Magliano said. "The big piece, the two-thirds, is product."

Recalls Add to the Company's Problems

Last month, Ford announced it was recalling more than 145,000 vehicles in the United States for a range of problems from defective latches to faulty drivetrains.

The recall involves 2005 model-year Ford 500 and Mercury Montego sedans and 2005-2006 Freestar minivans. The company also recalled more than 6,000 Escape hybrid sport utility vehicles from 2006.

Still, Ford says that it's confident it's in the beginning of a turnaround and that the restructuring plan will awaken a sleeping giant.

The company hopes a shift in focus from large SUVs to hybrids and vehicles that appeal to women will return the company to profitability by 2009.

Earlier this week, Ford unveiled a financing plan that would raise $18 billion in new debt, which would reduce the chances it would have to file for bankruptcy in the next two years, according to some analysts.

"You gotta get through this short run," Magliano said. "This gives them some breathing room."

For Ford, it may still be a long, rough road ahead.

ABC News affiliate WXYZ in Detroit contributed to this report.