TOPICS > Economy

Ford Cuts 10,000 Workers, Closes Two Factories

September 15, 2006 at 6:40 PM EDT

RAY SUAREZ: It’s the end of the line for tens of thousands of Ford workers. Executives at the nation’s number-two automaker announced they were slashing a third of the company’s salaried jobs; that’s in addition to offering buyouts to all of its 75,000 hourly workers.

It’s part of the latest plan to turn the ailing company around, according to Ford’s president of the Americas, Mark Fields, who spoke at a morning teleconference.

MARK FIELDS, Exec. Vice President, Ford Motor Co.: The simple fact is that the business model that served us in North America for decades no longer works. We must change to a new business model that delivers greater bottom-line contributions from cars and crossovers, continued leadership in pickups, new products that drive revenue, and actions that move rapidly to reduce our costs to achieve profitability.

RAY SUAREZ: Fields also confirmed Ford would idle two more two plants — one in Ohio, another in Canada — for a total of 16 plant closures by 2008. It’s the second time since January that Ford has moved to reduce its workforce, scale back production, and ramp up new products, all as part of its so-called “way forward” plan to return North American operations to profit.

Just last week, Bill Ford stepped down as CEO and was succeeded by former Boeing executive Alan Mulally. Ford remains chairman of the company, which lost $1.44 billion during the first half of this year.

The new cuts at Ford would reduce its total North American workforce by 29 percent, from the current level of about 130,000 to about 92,000 by the end of 2008. The shake-up has left employees rattled.

JIM COX, Ford Employee: I’ve been over there for 13 years, so now what do I do? Do I start looking for a job now?

RAY SUAREZ: Under the terms of the voluntary buyout plan, which the United Autoworkers Union agreed to yesterday, workers will choose options that pay them between $35,000 and $140,000 to leave the company. Those who opt for the more generous packages would have to give up their health benefits.

Dearborn, Michigan, Ford plant employee Brent Orr has worked for the company for 12 years.

BRENT ORR, Ford Plant Employee: I’m probably going to take a buyout, one of the buyouts that they’re offering, just because they’ve redlined our trade. No more carpenters will ever be hired at Ford Motor Company ever again.

RAY SUAREZ: Ford, like other American automakers, has been battered by the car market’s rapid shift from Ford’s staple — trucks and sport utility vehicles — to more fuel-efficient foreign cars, as gas prices have soared.

Earlier this year, number-one automaker General Motors offered buyouts to its hourly staff, and about one in three, or 34,000, took the company up on the deal.

A new "way forward"

Csaba Csere
Car and Driver Magazine
[P]art of that business model was for Ford to put all of its eggs in the truck basket. And that worked spectacularly well in the '90s, but it stopped working in this millennium as other competitors went into the truck business.

RAY SUAREZ: For more on what the Ford move means for the company, its workers, and Michigan, I'm joined by Rebecca Lindland, associate director of the automotive group at Global Insight, an economic research firm in Boston.

Ron Lare started on the assembly line at ford nearly 30 years ago. He's now a skilled tradesperson at the Dearborn, Michigan, plant. He's a member of the United Autoworkers, but does not speak for the union.

And Csaba Csere is editor-in-chief of "Car and Driver" magazine. Both Ford and the UAW declined our requests for interviews.

Rebecca Lindland, you heard the Ford executive. The business model that they used for decades no longer works. Is this new one, the way forward, what the company needs?

REBECCA LINDLAND, Global Insight: Well, most of it is what it needs. You know, the presentation this morning addressed production cuts, which they certainly need to do. It also addressed the workforce, where cutting costs is another big aspect of turning around the company.

The third part that still needs a lot of work, in our opinion, is on the product side. And even though they talk about it being a product-led turnaround, we still don't see those new and exciting models that really resonate with Ford heritage.

RAY SUAREZ: Csaba Csere, is a product-led turnaround going to be difficult for Ford?

CSABA CSERE, Car and Driver Magazine: It's going to be very difficult, because part of that business model was for Ford to put all of its eggs in the truck basket. And that worked spectacularly well in the '90s, but it stopped working in this millennium as other competitors went into the truck business, as Ford continued to neglect cars, and, finally, as gas prices went up, it's really taken them out of all segments.

And to really get back into the truck business and to build up a crossover business almost from scratch is going to take some time, although it's getting started already, because there are two new crossovers about to be introduced in November.

 RAY SUAREZ: Well, I was just going to ask you whether the company brings any market advantages or some strength in certain segments that will allow them to keep selling while they retool the company?

CSABA CSERE: Well, Ford has done very well with SUVs over the years. Crossovers are a form of SUV. They're simply an SUV that's built on a car platform, not a truck platform. So Ford knows a lot of those customers and has some connection there.

But, then again, you know, these are new name plates, and getting them going in a market that has a lot of crossovers out there already, it's not trivial. They're good products, but they're not automatically going to take the market by storm.

A worker considers his options

Ron Lare
Ford employee
I think the UAW members are their best resource, and I think they're cutting back more than they need to. And certainly, I think this is the fault of bad management, not the fault of the workers.

RAY SUAREZ: Ron Lare, what kind of work do you do for Ford?

RON LARE, Member, United Autoworkers Union: I'm a skilled tradesperson, tool- and dye-maker at the Ford Rouge plant.

RAY SUAREZ: What does a tool- and dye-maker do?

RON LARE: Tool- and dye-maker makes or maintains machines that stamp metal parts.

RAY SUAREZ: And will Ford no longer need people like you? When they offer a buyout to all 75,000 production workers, how do they make sure they still have who they need?

RON LARE: Well, I think that's a very good question. I think they are going to get rid of more people than they can afford to. I think the UAW members are their best resource, and I think they're cutting back more than they need to. And certainly, I think this is the fault of bad management, not the fault of the workers.

RAY SUAREZ: Well, what goes into your decision of whether or not to take the buyout? What do you have to consider before you know whether you can take Ford up on the offer?

RON LARE: Well, there are some personal considerations. I'm 59 years old, but I have a young daughter. I'd like to spend more time with her. On the other hand, I need to save for her education. And I'd also like to stay in the fight to make the UAW stronger, because we're going to need that to be a fighting union again.

RAY SUAREZ: Have you had a chance to talk with fellow workers, especially those in your boat who might have thought of themselves as a little too young to retire, but kind of old to start over on a work career?

RON LARE: Well, yes, I have, and there's a very wide range of views from people. Some people are trying to recover from the news itself, although it wasn't totally unexpected. Many are angry at Ford management.

And others say that the UAW -- and others like myself say that the UAW needs to organize the transplant facilities in the U.S. from other auto companies around the world, and we can do that only with some changes in the UAW.

Looking elsewhere for jobs

RAY SUAREZ: Rebecca Lindland, a lot of guys and women, like Ron Lare, have lost their jobs working for the big three over the last decade, yet there are foreign plants popping up all over the country. Why don't those workers get those new jobs?

REBECCA LINDLAND: Well, because they're nonunion jobs, as Mr. Lare referred to. The transplant new factories, which are primarily moving into the South, are nonunion plants.

They tend to pay significantly less sometimes or, in fact, their health benefits are really the big difference that you'll see at a transplant location. And we talk about transplants, basically the imports like Honda, Toyota, Nissan, Kia, Hyundai, building plants here in the U.S., but those plants are nonunion.

RAY SUAREZ: And so even middle-aged workers, workers still in their 30s and 40s, if they were willing to relocate, could they vie for jobs in Kentucky, Alabama, South Carolina, some of the states where those new plants have gone?

REBECCA LINDLAND: You know, Mr. Lare would actually probably be a better person to answer that. I'm not sure if the union prohibits you from taking a job with a nonunion facility. Does it, Mr. Lare?


RON LARE: Well, one would have to leave the company one is at now and give up a lot of seniority, so that would be a very risky proposition.

REBECCA LINDLAND: For younger workers, maybe.

RAY SUAREZ: Yes, yes, especially if you're not in line for a lot of money, the way the buyout plan has been structured, it might look like more of a proposition for you.

Csaba Csere, this must be hitting Michigan hard.

CSABA CSERE: Well, it's hitting Michigan extremely hard. The state already has the highest unemployment rate in the country. A lot of that unemployment is concentrated around the Detroit area. And ultimately, Detroit is still a company town, and the company is the domestic auto industry. And all three companies are hurting to a greater or lesser extent.

There have already been a large number of layoffs, both blue-collar and white-collar. There is a large number of layoffs already scheduled that haven't even happened at General Motors. And now Ford is bringing this forward, and it's extremely hard on southeastern Michigan.

RAY SUAREZ: And is there no compensating inflow of new manufacturing or investment that will soak up some of this workforce?

CSABA CSERE: Not terribly much, really. Part of the problem is that, for an awful lot of the manufacturing in the United States, it is going nonunion, and this is a very strongly union area of the country, and there isn't really that much moving in here.

I believe in the last census Michigan actually didn't gain much population. In the last five years that they looked at, the state is losing people, and it's because these jobs are going away.

Management vs. unions vs. workers

Rebecca Lindlund
Auto industry analyst
[F]or a state to lure a plant to its location, in some ways it needs to sometimes ensure that a workforce is not going to be unionized and you're not going to be faced with high cost of employment and high benefits.

RAY SUAREZ: Well, Ron Lare, what's out there for you, if you decide that the buyout package -- especially as a very senior worker -- is worth it for you?

RON LARE: Well, I'm in a much better situation than the young workers. They're the ones who are really going to bear the brunt of this. I may get an early retirement package, but I'd like to respond to something another speaker said, which is talking about jobs going away.

I think that most of the jobs that have been lost, the large majority, if not virtually all of the jobs that have been lost in the U.S. from the auto companies, in fact, are still inside the U.S. in nonunion or in union parts shops but at a lower pay.

They've left the big three. They're still in the U.S. The UAW needs to fight harder to get representation for all autoworkers. That means everybody that makes something that goes on a car, wherever they are in the U.S.

And we need solidarity with Ford workers around the world. We do have some leverage. Ford is profitable worldwide. I think we need to get together with autoworkers in other countries with joint contract expiration dates and joint strike deadlines.

RAY SUAREZ: Rebecca Lindland, does that sound like a future that companies, that manufactures are willing to buy into, the one just spelled out by Ron Lare?

REBECCA LINDLAND: Well, I think that when you look at where new plants are going -- Kia just announced Georgia, Hyundai's put their plant in Alabama, the new Nissan plant in Mississippi -- you're talking about a workforce that has not even had a job opportunity in a long time. And so to unionize and cause that kind of disruption would really just push these plants someplace else potentially, because there's a lot of state funding that goes into bringing these plants there.

And so, if you can get your workforce to say, you know, "We're not going to unionize, especially if you bring this plant here," unions are very controversial in this day where there's very few of them left, and there's pros and cons to them, quite frankly.

And so I think that, for a state to lure a plant to its location, in some ways it needs to sometimes ensure that a workforce is not going to be unionized and you're not going to be faced with high cost of employment and high benefits.

RAY SUAREZ: Well, Csaba Csere, the union is often faulted for raising the base cost of an American-made vehicle. With Ford, is that where the fault lies and contribute to the company's problems?

CSABA CSERE: Well, it's only a small part of the problem. There's no question that the unionized workforce does cost more than the nonunion workforce.

But when you look at the differences that people are willing to pay for some of the Ford products versus some of the more competitive imports, that difference is much bigger than the cost difference imposed by the union. And what that says is it's the wrong product for the market right now.

The correct product would more than offset the union problem. And you can't blame the factory workers for building the wrong cars because management has designed and engineered the wrong cars.

RAY SUAREZ: Ford plans to finish this transition by the 2008-2009 model year. Guests, thank you all.