Economics: Corporations: Ford scrambles to restructure with massive buyouts of union workers to cut labour costs

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The big news in American business today is the apparent-pattern of radical restructuring of the labour force in the Big Three auto companies. First it was GMC, now Ford. Will Chrysler-Daimler follow suit in the USA? Sholnn Freeman reports in Washington Post, "Ford Set To Offer Buyouts To 75,000" (Sep15,2k6). I got the news as it broke thru MarketWatch, the DowJones business and finance news service. Back to WaPo's Sholnn Freeman front-pager:

Ford Motor Co. will offer its 75,000 hourly workers packages of incentives to leave the company, as the No. 2 automaker pushes to accelerate its North American turnaround plan.

The buyout packages, ranging from $35,000 to $140,000, are similar to those offered to union workers at General Motors Corp. earlier this year. Workers have been awaiting details of the plan ahead of another big restructuring announcement from Ford, scheduled for today.

Ford and GM, reeling from global competition and high gasoline prices, have initiated massive programs to slash costs. In recent years, the Detroit automakers relied heavily on pickup trucks and large sport-utility vehicles, but sales of those vehicles are down and profits have plunged. The companies have made deep cuts as they try to shrink their way back to profitability.

Behind the story of the bonanza for assembly-line workers, MarketWatch tells us, is Ford's deadly overall financial picture:

According to the United Auto Workers, Ford has agreed to send voluntary, one-time buyout offers to roughly 75,000 hourly workers.
"The goal of the buyout packages is to offer options to UAW Ford workers, while allowing the company to improve its cost structure and competitive position in the marketplace," the UAW said in a statement released late Thursday.

The package includes five options, ranging from a $35,000 retirement incentive to a $140,000 lump-sum payment and six months of medical benefits for senior employees. Eligibility for the packages runs from Dec. 31, 2006, through Aug. 31, 2007.
A similar tactic at General Motors has let that company pare its work force by 34,000.

Economics > Auto Corporations

Hammering out the deal was widely seen as recognition by the union of Ford's increasingly dire financial straits.

Detroit News>, citing an internal report prepared by the office of Ford's chief financial officer, said the company is projecting a 2006 loss from ongoing operations of $5.6 billion to $5.9 billion.

Soaring health-care and pension costs, a rising problem for many major corporations inside and out of Detroit, have been a major drain on the company's shrinking cash flow.

Add one-time costs linked to the company's "Way Forward" restructuring, which includes extensive job cuts and factory shutdowns, and the loss jumps to $9 billion. See full story by Bryce G. Hoffman.

Ford officials, while declining to comment on the report, said Ford would announce on Friday details of its accelerated turnaround plan, which seeks to get the nation's No. 2 carmaker back on the road to profitability by 2008. Leaks and speculation over the beefed-up downsizing have been big drivers behind Ford's share price, which is up 47% since late July.

ABC News' online feature Money carries an Associated Press analysis of Ford by Tom Krisher who has the courtesy to name the key players. The dramatis personnae includes: UAW president Ron Gettelfinger; new Ford CEO, Alan Mulally (just arived after being headhunted from Boeing) who will replace none other than William Clay Ford Jr; Anne Stevens, executive vice president, who designed the failed restructuring plan now being revamped and amped, is retiring at 57. Krisher doesn't mention that the head of manufacturing, David Szcsupak (51), is also being retired after just one year at that post.

Factoid from Bloomberg: This is Ford's 3rd restructuring in the last 5 years.

Factoid from ABC/AP: "Catherine Madden, an auto industry analyst at the consulting company Global Insight Inc., said although not all 75,000 workers will take the packages, the size of the offer illustrates the magnitude of Ford's troubles. 'No matter what, the number reflects the pressure the Ford Motor Co. is under right now,' she said. 'That's how significant the mounting pressures are on Ford.'

Factoid (same): "Ford had about 82,000 workers represented by the UAW at the end of last year, but about 6,500 have taken previous buyout and early retirement offers made mainly at plants already slated for closure, company spokeswoman Marcey Evans said Thursday."

Why are GMC and especially Ford in dire straits? Back to Sholnn Freeman: "Ford and GM, reeling from global competition and high gasoline prices, have initiated massive programs to slash costs. In recent years, the Detroit automakers relied heavily on pickup trucks and large sport-utility vehicles, but sales of those vehicles are down and profits have plunged. The companies have made deep cuts as they try to shrink their way back to profitability." Ford has refused to produce large-scale hybrid or fully-alternative autos, trucks, SUVs, buses, whatever. They haven't pioneered with massive ad campaigns to re-educate the public. They have not operated in the public interest. And, they have given-in obsequiously to monopolistic labour unions with outmoded anti-pluralist approaches to representation of workers, unions which first joined the auto employers in their defective philosophy against the public interest (major polluters) and unions which then blackmailed the Big Three with wage/benefits demands that were beyond good, that couldn't be sustained, and are now coming home to roost. Sad to say. We need to build Christian labor movements to challenge the monopolism, anti-pluralism, forced membership, inflated wage/benefit demands that bring employers to ruin, and contribute to choking our society with polluting products.

-- Politicarp

Further Research:

Bloomberg's report on Ford
Board of Directors, Ford Motor Company