Ford to Cut Up to 30,000 Jobs

BILL FORD:

Today we declare the resurgence of the Ford Motor Company.

GWEN IFILL:

It fell to CEO William Clay Ford, the great grandson of Henry Ford, to put the best possible face today on a difficult announcement. The nation's second largest automaker will be idling plants and laying off tens of thousands of workers.

BILL FORD:

Today you'll see and you'll hear how serious we are about winning in the 21st Century, both in North America, and around the world.

By taking the actions we are today in the long run, we will create far more stable and secure jobs. We all have to change, and we all have to sacrifice. But I believe this is the path to winning.

GWEN IFILL:

But despite a better than expected fourth quarter, Ford's North American division lost $1.6 billion last year. The chief reasons: Sales of its once popular but gas guzzling heavy trucks and sports utility vehicles have plummeted as gas prices have soared.

And Ford, like No. 1 automaker, General Motors, is saddled with soaring healthcare and pension costs. The bottom line today: Twenty-five to thirty thousand jobs will be cut and 14 plants idled by 2012, among them, facilities in Wixom, Michigan, Atlanta, St. Louis, and Batavia, Ohio.

Another plant closing in Windsor, Ontario, was announced last year. Two other sites to be sidelined will be identified later this year. In a statement the United Auto Workers Union called the Ford plan "extremely disappointing and devastating news for the many thousands of hard-working men and women who have devoted their working lives to Ford."

Also, like General Motors, Ford has been losing market share to foreign automakers, Japan's Toyota in particular. This is the company's second wave of job cuts and plant closings in four years.

GWEN IFILL:

So does this latest wave of bad news presage a turn-around or more trouble for Ford? To examine that, we turn to John McElroy, an automotive journalist and host of the television program, Autoline Detroit; and Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.

Professor Shaiken, I'd like to start with you. 30,000 layoffs, 14 plants idled, shut down essentially, how big an impact will this have on Ford?

HARLEY SHAIKEN:

This will have a very big impact on Ford. If we combine the layoffs at GM and Ford, this is comparable to shutting down the hourly work force of the Chrysler Corporation in the United States. It's going to affect a lot of communities. It's going to affect a lot of individuals. There's going to be a lot of broken promises and damage that comes out of this. The workers themselves have a strong social safety net in place.

But there's little question that long-term, the opportunities, the communities, and the fate of many workers themselves are very much going to be at risk.

GWEN IFILL:

Mr. McElroy, given what we have seen happening in the auto industry and especially with Ford in the last several years, was this something these workers should have seen coming?

JOHN McELROY:

I think so because we've seen Ford sales drop by a million units just in the last five years. When you have that much decrease in sales, you don't need that much production. It's pretty obvious that you don't need as many plants as Ford has had, so it really should not be a surprise to anybody. It may be a surprise to particular plants, that they're getting cut. But overall in the industry, this is no surprise to anyone.

GWEN IFILL:

So why, Mr. McElroy, has Ford come to find itself in this position?

JOHN McELROY:

Well, you know, I'd say basically there's two reasons here. Number one, for decades now — this is not an overnight phenomena — it's not been coming out with the kinds of cars and trucks that people really want, I mean, from the top to the bottom of its line. Here and there it's had some very good successes, the F-series, the Mustang, the Explorer and the like.

The second thing that's really got Ford caught up is its legacy costs. It has pension and healthcare costs that have exploded out of control in just the last five years.

In terms of pension, people are living a whole lot longer than ever before. As we all know, this is a national problem, not just an auto industry one. Healthcare costs are going up far in excess of the rate of inflation.

GWEN IFILL:

But, explain to me, Professor Shaiken, how a company that lost $1.6 billion last year still made money worldwide? How did that happen? In America, they lost that money, I mean, in North America, I'm sorry.

HARLEY SHAIKEN:

Well, the irony here is that the Ford Motor Co. is doing very well globally but it somehow has lost its touch in its home market. And that's proving devastating to its U.S. workers, which provide a lot of the high-paid industrial manufacturing jobs in this country.

In fact, one out of every three of Ford hourly workers in the U.S. is subject to layoff under this announcement.

I think Mr. McElroy raised a couple of good points in terms of the causes of this: The fact that Ford really did misjudge the market. But it isn't simply responding to the market. It's anticipating and creating a market, much the way that Apple did with the iPod or that Toyota did with the Prius, and then the Ford Motor Co. and GM and Chrysler are saddled with the legacy costs. That's a failure of government policy, not really a failure of Ford or the union.

And in that regard, just to give a point of reference here, Ford, GM and Chrysler support between them 800,000 retirees and their spouses; because the historically foreign-owned automakers that have built plants in the U.S. have a much younger workforce, they support 1,000 retirees amongst all of them. The difference between 800,000 retirees and 1,000 is very considerable.

Without a change in public policy for pensions and for healthcare, where Ford has a $1,200 or so cost per vehicle for healthcare compared to $450 for the foreign-owned automakers operating in the U.S. really does illustrate how urgent it is to address the public policy issues here.

GWEN IFILL:

Well, before I get back to Mr. McElroy on that point, I'm curious, what kind of concessions should unions or have unions been making facing these kinds of numbers?

Professor?

HARLEY SHAIKEN:

Oh, in terms of the concessions that unions are making?

GWEN IFILL:

Yes.

HARLEY SHAIKEN:

Well, there have been major concessions in recent months at both Ford and GM.

In December the union agreed to a rollback of healthcare for retirees, which amounted to over $700 million in potential annual savings for the company.

So there had been major movement here, but in effect we don't want to set up a dynamic that says competitive firms in the U.S. are competitive because they offer few benefits and low wages. That hasn't been the history of U.S. economic success. Uncertain workers, lower wages essentially means lower purchasing power. So that's why I think it becomes so important here to address this not at the bargaining table between Ford and the UAW, not even in the industry, but to address it as a national government policy when it comes to national health insurance, when it comes to relief on pensions.

Without doing this, we endanger not just the company or an industry, we endanger the entire manufacturing base in the United States. The auto industry accounts for about 11 percent of the gross value added in manufacturing. So this is a larger issue than just Ford or auto.

GWEN IFILL:

So, Mr. McElroy, if it's a larger issue, let's make it a smaller issue for a moment, because I'm curious about what makes Ford different. Is Ford different than what we just saw happen at General Motors? Does Ford have a unique set of — aside from the legacy costs, set that aside and assume everyone is suffering from these pensions benefits issues, what are the unique set of circumstances that Ford faces which puts them in this position today?

JOHN McELROY:

There isn't a unique set of circumstances affecting Ford. General Motors is in the same boat, Chrysler to a lesser degree simply because it doesn't have the number of retirees and simply the number of people that it's got to support from a healthcare standpoint, but it's not just the Americans either.

You can look over in Europe and see that Fiat is in the same problem. Volkswagen is very much in the same problem. This tends to be a problem and well-entrenched in long-term companies in industrialized countries. It's not a unique problem just to the Ford Motor Company.

GWEN IFILL:

But is it about at all what it is that Ford is actually producing, whether they are producing SUVs or hybrids or the kinds of vehicles, the style of vehicles that they're producing?

JOHN McELROY:

No, I think that this is just a matter of how the auto industry is evolving at the time. You know, there's a good analogy with the television networks.

If you go back 30, 40 years ago, the big three national networks dominated television industry. They had over 90 percent market share. But then cable came along and CDs and DVDs came along. Now you can get television programs on your iPod, so very much the same sort of thing has happened.

We've seen many more car companies come into this business. There are far more models that are out there. The pie hasn't grown that much bigger. It is bigger but it's gotten sliced a whole lot more finely.

Now you can argue over why the traditional, more lethargic kind of industrial companies haven't kept pace with the newer ones but it's very much the same kind of analogy. There is just simply far more competition today and it's going to increase because we know probably by the end of this decade, Chinese car companies will be coming into this market and it's only going to get finely sliced beyond what it is today.

GWEN IFILL:

Professor Shaiken, today Bill Ford in making his announcement today called, said this was announcing the way forward for Ford Motor Corporation.

What should the way forward truly be for Ford in this — at this crossroads?

HARLEY SHAIKEN:

Well, clearly at best these very painful announcements stop the bleeding, The patient is still in intensive care. For Ford to become profitable it needs what we were discussing a moment ago. It needs products that people want to buy, creating its own markets. But it also needs a good relationship with its union and its workers. That's vital to the kind of quality and productivity that Ford will need to be profitable.

Now the irony here is Ford has made important strides in recent years in its quality and productive. For example, a Ford plant won the J.D. Powers, the auto consulting firm, Bronze Award for quality in the entire western hemisphere.

That means the initial quality of that assembly plant was No. 3 of all assembly plants in the western hemisphere. The irony is that that plant was the Wixom plant, one of those that is scheduled for being shut today.

So Ford real challenge is how does it balance these very painful cuts with the support of the UAW and its workers to restore itself to profitability in North America?

That's the key challenge, and I think there's a lot riding on that in terms of the industry and the communities and the workers themselves.

GWEN IFILL:

Mr. McElroy, is Ford equipped to meet that challenge?

JOHN McELROY:

Well, look, they've got a plan. They've got to be working on that plan but at least they have got a plan. But there's other legacy costs here. I don't exactly agree with Professor Shaiken on this. One of the things that Ford and General Motors and Chrysler is saddled with is what they call the jobs bank. All these people that are getting laid off are simply going to go into the jobs bank where they are going to get over 90 percent of their take-home pay.

GWEN IFILL:

What is the jobs bank?

JOHN McELROY:

The jobs bank is a situation that's been negotiated between the companies; it's been going on for a couple of decades now, where essentially you never really get laid off. You may not go into the factory and build cars but you're still going to get paid. There are thousands of people in here. They've been in there are for years. The union wants to keep this going and I don't know of any time or place in any business whatsoever where you just keep on paying people for doing no work whatsoever. I don't think it's a sustainable model, and I think it's actually been one of the things in the last five to six years that have absolutely driven the brand values of the domestic automakers into the ground.

GWEN IFILL:

John McElroy and Harley Shaiken, thank you both very much.

JOHN McELROY:

Thanks.