Ford accelerates "Way Forward"
Ford Motor Company [NYSE: F] today announced plans to further reduce its capacity and work force, and ramp up new product introductions as it accelerates its North America “Way Forward” turnaround plan.
Ford will cut its North American salaried-related work force by about a third and offer buyout packages to all Ford and Automotive Components Holdings (ACH) hourly employees in the U.S. The reductions will contribute significantly to reducing ongoing annual operating costs by about $5 billion. In addition, Ford will renew 70 percent of its North American product lineup by volume by the end of 2008.
The announcements are being made this morning in an employee address led by Ford Executive Chairman Bill Ford, President and Chief Executive Officer Alan Mulally, President of The Americas Mark Fields and Chief Financial Officer Don Leclair.
“These actions have painful consequences for communities and many of our loyal employees,” said Bill Ford. “But rapid shifts in consumer demand that affect our product mix and continued high prices for commodities mean we must continue working quickly and decisively to fix our business. Mark Fields and his team deserve credit for the accelerated Way Forward strategy, which puts us on an even faster product-driven path to success."
“Alan Mulally’s experience in turning around a major industrial company will help guide the implementation of these measures as he assumes leadership of the company,” Bill Ford continued. “The actions we announce today – coupled with the North American production cuts we announced last month, the strategic alternatives we are considering for Aston Martin and a push for greater progress from our operating units and brands around the world – are part of a series of actions that Alan and our entire global team will be taking to put the company on a path to sustained profitability and success.”
Mulally, whose appointment as CEO of Ford was announced last week, echoed support for the Way Forward plan and for the team leading the company’s North American turnaround.
“The steps we are announcing today are clearly needed to ensure the ultimate turnaround of the business in Ford’s biggest and most important market,” Mulally said. “Although the process has been under way for months, I have had a chance to review these actions and am convinced that they provide the sound, product-led underpinnings and cost reductions we will need to achieve our goals. I look forward to helping with the implementation."
“Turnarounds of this magnitude succeed when capacity and costs are aligned with a realistic expectation of demand,” Mulally continued. “These actions are certainly consistent with that goal. We will focus intensely on the needs of our customers in North America, and around the world, by pulling forward new products and creating new markets. We are a team united by a shared vision to build the best automobiles in the world at Ford Motor Company.”
Fields said the Way Forward plan will continue to focus every part of the business on the customer – building stronger Ford, Lincoln and Mercury brands; strengthening the company’s North American product lineup; improving quality, and accelerating progress on productivity and competitive costs.
“The fundamentals of our Way Forward plan have not changed, but our timetable has changed dramatically,” said Fields. “We’ve taken a sobering look at the industry and our own business, and the entire team in North America has a renewed sense of urgency and a clear view of what it will take to position this business for profitability."
“We know our decisions bring more pain to the business in the short-term, and they require sacrifice from our employees, labor unions, dealers and suppliers,” he added. “But, together, we are building a much stronger Ford Motor Company and a more secure future for us all.”
Fields said the team will continue to push to move further and faster throughout the business.
“Our work is far from over. We recognize that the competitive landscape and cost pressures have significantly challenged our traditional business model, and that recognition is driving more investment in small cars and crossovers, even as we continue to position ourselves to remain the truck leader,” Fields said. “We will remain quick and decisive in executing our Way Forward plan and flexible in reacting to changing conditions in the future.”
Market share declines, reflecting primarily segment shifts, and higher-than-planned raw material costs will mean full-year profitability for Ford’s North American auto operations is not expected before 2009.
“Clearly, we could have cut product programs and maintained our goal of North American profitability in 2008,” Fields said. “But, even as we further reduce our costs and capacity and make tough-but-necessary decisions throughout our business, we cannot and will not retreat from the critical investments to deliver the right products for our customers.”
A summary of the North America Way Forward actions to be implemented by the end of 2008 and resulting financial impact follows.