While the Steelers in the Superbowl is a good thing, this may not be:
Ford Motor Co., the nation’s second-largest automaker, said Monday that it will cut 25,000 to 30,000 jobs and idle 14 facilities by 2012 as part of a restructuring designed to reverse a $1.6 billion loss last year in its North American operations.
The cuts represent 20 percent to 25 percent of Ford’s North American work force of 122,000 people. Ford has approximately 87,000 hourly workers and 35,000 salaried workers in the region.
Plants to be idled through 2008 include the St. Louis, Atlanta and Michigan’s Wixom assembly plants and Batavia Transmission in Ohio. Windsor Casting in Ontario also will be idled, as was previously announced following contract negotiations with the Canadian Auto Workers. Another two assembly plants to be idled will be determined later this year, the company said.
I don’t know what the long term survival chances are for Ford, GM, and Chrysler, but this sure doesn;t sound good.
If I lived in Michigan, I would buy a share of Ford stock just so I could go to the next shareholders meeting and ask, “So, since you just laid off 30,000 people, could Executive Management tell us how much of a reduction in pay and benefits they took to help with keep the company solvent?”
I think a lot of the larger shareholders will be asking that same question too, along with “why aren’t you designing and building cars people want to buy?”
Look, these are the same people who own the Detroit Lions. Why would anyone expect them to make sound business decisions?
Indeed. It’s embarassing to watch them constantly scramble to keep up, but they’re always 5 years behind the trend.
Larger shareholders are as much a problem as anything else. Their vision extends to the next quarter or two, at most. Up until now, a majority of americans loved crap. Quality is job #1, my ass.
For those of us who gave up on Ford/GM/Chrsyler in 1980 or so, there’s a new trend. We won’t buy Japanese models assembled in the US. Anything with more than 10% US content, and it’s off the list.
I hate to see people lose their jobs, but I’m not buying another Ford car ever. I had an insanely bad ’96 Taurus that blew the transmission and the AC twice, and finally died with less than 100k easy miles when the engine block cracked and the head warped. My parents had a similar problem with a Chrysler. Meanwhile, after my wife’s Honda hit 200,000 trouble free miles, we sold it for bluebook retail value and bought a loaded Toyota Camry (assembled in Ohio) that has been totally trouble free. I have a lot of friends who have had similar experiences, and now drive Toyotas, Lexuses, Nissans, Hondas, BMWs or Volvos, anything but American made cars. I support US businesses where I can, but I’m not stupid with my money. It sounds to me like the market is punishing Ford for making subpar products.
Perhaps, but Ford has had some successes. Their Focus was very popular, had great ratings and was always touted for its Euro look. Then, they faltered by making the “upgrade” to the Focus the Fusion which was pretty much priced out of the range of Focus owners.
Simply, they need better conceptual enginners and people willing to think outside of the box.
I would buy a share of Ford stock just so I could go to the next shareholders meeting
I doubt that would work.
Ford in the U.S. is essentially a bank that sells cars. They don’t make any money selling cars. What money they make comes from Ford Credit.
For a long time the strategy of the Big 3 was to shame people into buying American. Ya know, I’ll pay a couple of bucks extra for towells or something that are made in America, but when I’m spending $25,000, partiotism isn’t going to be much of a factor in the decision. And I say this as someone with a brother in law that works at a GM plant. For my parents, all it took was one Honda Accord that lasted for over 250,000 miles, and they became Honda owners for life.
I will say, though, that I do like some of the new muscle cars they’re coming out with. The Charger, the Mustang, and the GTO are all pretty sharp looking, and that Solstice is pretty nice looking as well. As someone who drives maybe 5,000-6,000 miles per year, I would look into buying something less fuel efficient. If I had to start commuting by car again, however, as opposed to taking the “L”, I would need something that got more than 30 MPG, and I just don’t see many American options that can deliver quality at that MPG.
And let’s not forget executive boards, either. They’ve got the power to make management changes, and yet there have been remarkably few shakeups at GM and Ford despite the fact that they’re bleeding billions of dollars.
After this latest downsizing, Ford will have dumped 42% of its workforce in the last five years, while watching its share of the market go from nearly 25% a decade ago to just over 17% in ’05. Companies can either grow or shrink – domestic automakers have clearly decided to go with the latter option, because drawing in customers with compelling product is apparent far too difficult and expensive. It’s definitely sad, and that’s why I’m not real sad to be getting out of the auto industry despite the fact that motor oil runs through my veins.
Now, it’s just time to sit around and wait for a bankruptcy filing or two.
It’s also tougher when you’ve just canned 25,000 people who were pretty much guaranteed to buy your cars before being fired.
The restructuring is good for Ford, and is the correct response to the problem so far as it goes. Ford has two big problems, one of which is excess capacity and cost with older manufacturing infrastructure and products that came from an older paradigm (SUV- heavy). The other is huge costs related to pensioners.
Ford can deal with the first problem, but the second one will be harder and uglier.
Try to look past the end of your nose, Darrell. Ford has a vehicle that has been the top selling model in the US for nearly 20 years.
There are only so many vehicles that can be sold in a year. And today, the bulk of that number is carved up between six companies. It used to be three. That leaves Ford with a lot of extra capacity. And then there is the cost of the pensioner base.
What’s Toyota’s employee-pensioner cost per vehicle compared to Ford’s? Why?
25k cars is hardly enough to prime a Big Auto production line. Spread out over 20 models, it’s not even a blip.
The Other Steve
I’m with Al here.
I will never buy another car from the Big Three.
Three years ago I had a choice betwene getting a Cadillac CTS with employee pricing, or a BMW 3-Series. The BMW was $8k more, and it was worth every penny extra. I’m nearly at 60k miles and have done only regular maintenance to it, the whole car is still tight and rattle free.(something you can’t even say about Japanese cars)
This is sad, but I think they’re actually handling it with a certain degree of responsibility (thus far). It’s not a shock that auto-assembly is not exactly in the U.S.’s comparative advantage wheelhouse, so some of these jobs are destined to go away no matter what, and by giving the employees at certain factories substantial lead time, they are allowing for a soft(er) landing.
And yes, build better cars.
I have an 01 BMW 330CI and a 99 Pontiac Grand Prix in my garage. Guess which one gets driven most often? Guess which is a rattle trap? Which one has a kick ass engine and driveline but interior panels have seams that don’t line up anymore? Which interior looks and feels like it was designed and appointed by Fisher Price?
How do you propose that Ford could have maintained the 25% share while Toyota, Honda, Nissan and a revived Chrysler are carving out share?
My point is that share is only relevant if the number of sharers is stable. If the number of them goes up, the share held by the legacy group must decline in order to accomodate the new group.
Number of units can go up while share goes down, which is what will happen in a growing market with new competitors coming online. Share means little here. It’s media-speak.
I have a Chevy, and I’m happy with it. But it was built in Korea, so I’m not sure if it really applies to this discussion. And buying an ’04 for a little over 12k, used, with a fairly good warranty? Works for me right now. *grin*
But yeah, I hope the US automakers can at least stabilize.
Anecdotes? Under the ppGaz roof, which covers three drivers, nine new FoMoCo vehicles in 18 years.
Not one of them has ever been in the shop for anything more serious than accessory repairs (battery, an a/c hose, brake service, an oxygen sensor). Driven in the hottest desert in the country, and up and down mountains with 8,000 foot changes in elevation.
Five SUV-trucks, four cars. Small, medium and large. 4-cyl, 6-cyl, 8-cyl.
What can I tell you? Anecdotes are anecdotes.
I drive a ’98 Taurus, and have about 175,000 km on it right now, and it’s holding up well (knock on wood). I do like to buy domestic when possible, but am not going to buy crap. I used to rent cars a lot when I didn’t own one, and it was a great way to try out different models. We had a Mazda 3 once, drove like a dream, handled beautifully – I fell in love with it. We had to bring it back halfway through the weekend because we got a rock strike on the windshield and it cracked right through. They gave us a Pontiac Sunfire as a replacement. Bleurgh…what a contrast.
Ford trucks are still excellent, though…no complaints about the quality there.
And I work next to a salt mine, and live in Atlantic Canada, so our cars go through hell.
I don’t think this is entirely true. While I accept the point that the Big 3 cannot possibly return to the era where they controlled 75% of the US market, they can and should grow market share (as a growth strategy). Toyota, for example, has been growing market-share for years, and it’s not like they’ve done so my manufacturing people to buy their cars.
Yes, Ford suffers from high pension costs and over-capacity. So I think this is a good move for them. Although I feel for the rank-and-file, who despite the demonizing portrayal of them as money-grubbing non-working union-do-nothings, are as hard working as anyone at a Toyota plant.
It’s the leadership of Ford has been faltering for years – not producing cars people want to buy. Combined with the structural issues, that makes this latest move not enough to revive Ford. Just enough to stem the bleeding.
I do wonder if the Big 3, Wal-Mart and the Unions got together, we could solve (or at least temper) the pension and health-care issues that plague the US when competing against companies in countries with nationalized health-care and better social safety-nets for retirement.
Pardon, all, while I respond to several of the above in bits and pieces.
re quality of ‘home-grown’, most consumer reports indicate the Saturn subset of GM has had a high satisfaction rate. Take with appropriate grains of salt.
re Japanese pension per vehicle: both legit and an apples to oranges comparison. Japan has a public pension system. It’s had to have some major modifications (most recently the “2004 Japanese Pension Reforms”) but it’s still quite functional. Oh, and Japan has a public healthcare system, yet another major load on the domestic auto profit line. Still, Japanese companies pay a portion of their profits into Japan’s public system. Thus to squeeze out the whole comparison you should really take time to compare respective tax loads in addition to the pension and other “required” benefits.
re best selling vehicle. Ford has had a vehicle that’s been number one in the US in its class. It’s also been number one in the class as a whole world-wide, though that’s being challenged. That said, it’s a bad thing when a company’s product which is number one has difficulty overcoming the losses generated by other product lines.
Krista, you drive in KM, so the cars obviously work different up there. Let’s compare apples to apples here.
I respectfully disagree, and think that the correct response would have been to make interesting automobiles. Ford has proven they can do it – the Focus was the first good American compact car, and the Taurus was absolutely world-class in its day – and that makes them even more frustrating than GM.
The need to downsize is simply a response to a symptom of the problem. It’s interesting that you mention legacy costs – had Ford and GM been able to avoid a sales slide, legacy costs would be simply a footnote to slightly disappointing profits and not the sort of thing that brings down an industry.
OK, let’s put this another way – Ford sells a hell of a lot fewer cars now than it sold just five years ago. We can parse this any number of ways, but Ford’s slide in market share is not proportional to the increase in the size of the market, nor does it say anything good about the company’s ability to maintain its customer base.
I can tell you’re a Ford fan – I’m a GM guy myself. But I don’t allow that to obscure the fact that the problem with the American car industry lies squarely with the product they place in the showrooms, and everything else is secondary. The Mustang, Fusion, and F-150 shows that Ford knows how to build good vehicles, but the problem comes in that they haven’t put that sort of world-class effort into every single vehicle that they put into showrooms. Customers see this, and they’re leaving Ford and GM in droves.
BTW, it’s probably wise not to accuse me of “media speak”. This industry is my life.
Reminds me of something a friend of mine is fond of saying.
“The plural of anecdote is no data.”
How do they do that? The number of cars you can sell is finite.
If they build “better” cars, they’ll last longer and … drive down demand for new cars, right?
So there you are, Ford or GM or Chrysler in 1985. How would you grow your market share, knowing that Honda, Toyota and Nissan are planning to deluge your market with good products? Try to keep them out? I think they tried that.
LOL. Pooh, you’re swell.
“I doubt that would work.”
It was actually a pretty popular extortion scam in Japan in the ’80s. A mobster would buy some shares of a company, distribute them to his leg-breakers, and then have them engage in disruptive and abusive behavior at the shareholders’ meeting until they were paid off.
I’ve test-driven Fords on several occasions, but never enjoyed driving one. It just seems like all American car companies are fundamentally incapable of putting together a reasonable manual transmission.
No, not quite. Build good cars, and they’ll hold their resale value, which means that your customers can sell them for a reasonable price when they’re four years old and thus afford another new car. The alternative is to sell your customers something that drops like a rock, which ties their hands to it and just keeps them pissed off at it that much longer.
The way for the Big Three to grow (or at least maintain) their market share in ’85 is the same as it is now – build a good car that’s interesting and takes advantage of any remotely relevant heritage. The Mustang, 300C, and Corvette are excellent examples of this. The Taurus was a technological showcase when it debuted (the shameful history of the way Ford treated its project manager is another story), as was the GMT400 (’88 GM full-size pickups). Ford owned the compact truck market for a long time, despite the fact that the Japanese invented that market. Chrysler did extremely well with the LH (Intrepid/Concord/LHS/300C) platform, and two decades later, they still own the minivan market that they invented. And the whole SUV thing was actually a perfect example of finding an unfilled market segment and exploiting it, which is something the domestic OEMs have not been very good at doing.
But the problem is that whenever we talk of world-class efforts by the Big 3, we end up without a large number of examples to discuss, and for every success, there’s a Pontiac Bonneville or Ford Freestar or Dodge Neon that never was quite good enough to be sold at reasonable volumes and profit.
This wasn’t inevitable – there was nothing pre-ordained in ’85 that said that the Big Three had to be the weaker competitors in the marketplace.
Are sales declining over the long term?
Sorry, I am not following.
Ford pretty much invented the segment with the Explorer, the first SUV to put up the big crossover numbers, and has held a leadership position in the segment with the Explorer all these years, even through the Firestone tire fiasco and an onslaught of a couple dozen excellent competitors.
Where exactly did Ford fail in the SUV market?
My fault – I wasn’t very clear. SUVs are indeed a segment of the market where the Americans showed that they could create a market segment and do well within that segment – Ford had a beautiful run with the Explorer, and GM has done extremely well in the full-size market. Where they will fail/are failing (check out the Explorer’s sales plunge as of late) is in their inability to innovate within that market, and their inability to understand when a trend is about to turn a corner or die off all together. As the market moves from midsize body-on-frame SUVs such as the Explorer to crossover vehicles and soft-roaders, American OEMs have not kept up (the Escape was late to market and has not been extremely impressive in the showroom, where as the Freestyle was here and gone in a blink of the eye).
Ford is putting the Edge, a very classy crossover, in showrooms this fall. The Fusion is doing very well and will have a hybrid version in showrooms … next year, I think. Bill Ford himself has explained the migration away from the SUV-heavy sales manifest to the smaller, lighter and greener product line, which is well under way. Ford has a lot of cash, and a number of very popular products.
What Ford also has is excess capacity and an army of expensive pensioners. Most of what you saw today was aimed at trimming those burdens long term, and bucking up the stockholders at the same time.
Actually, I think the Escape has been its segment leader since introduced.
I’ve been (hearted) in two seperate threads today. Almost makes not getting anything done at work worth it.
Bob In Pacifica
I have a Corolla that was manufactured here in California. Good car, but four years of parking lots has dinged the hell out of it. Runs great, though.
My mom worked for years for a Buick dealership in New Jersey, and still goes back every few years to buy another one. I was with her last fall when she bought her latest car, very nice, I must say. The dealership doesn’t even finance with GM anymore. I was with my girlfriend when she bought her latest (a Toyota) and they really fought hard to get the financing deal. My guess is that financing is a huge hunk of profit per unit.
Anyone got numbers on it?
Actually, Ford has the second-most debt of any company in the world (somewhere around $200B-300B, depending on who’s math you believe; GE is #1, GM is #3). As far as cash on hand, I can’t speak to Ford’s situation, but if I had to guess, I’d say that it’s likely much like GM’s (that is, it’s made up mostly of the company’s retiree health-care trust fund and dealer receivables).
Bucking up the stockholders they probably did – although the company’s market capitalization is still in danger of being wiped out by the upcoming pension reforms. Reducing the company legacy costs, though, likely was not accomplished today. I’m curious to see what kind of deal gets worked out with the UAW, but I’m guessing that those workers will stay on Ford’s books for a long time to come (and let’s not forget the 19,000 or so Visteon workers that Ford picked up late last year). That right there is the fundamental reason that I think that attempts at downsizing will result in a downward spiral towards bankruptcy for Ford and GM. We’ll see if I’m right in another few years.
If you think things look shaky for U.S. automakers now, you ain’t seen nothing. The Chinese are about to enter the U.S. market in a big way. Probably like early Korean imports, the first Chinese cars will be a little rough and uneven, low, low prices notwithstanding.
But, just given them about five years. U.S. automakers will try consolidation, probably. One or more may get folded into a foreign brand. Ten years from now, sayonara.
But never fear, folks. It’s just creative destruction. For every Ford, GM or DaimlerChrysler job lost, one or more new jobs will arise. After all, new McDonald’s and Wal-Marts are going up all the time.
I can’t see purchasing another American car until one of the Big Three comes out with a good hybrid… so far, the US hybrid offerings have been SUVs, while Honda and Toyota are running away with the fuel-efficient sedan market. The Prius / Camry / Accord hybrids aren’t getting any real domestic competition until the Ford Fusion and Chevy Malibu hybrids in 2008. Hopefully, they will have the fuel efficiency / minimal emissions / technological spiffyness and gadgetry to match the next Prius version coming out around the same time.
Actually, the Japanese, Europeans, and now the Koreans have done well at creating American jobs in the automotive market – not just at their own plants and engineering facilities, but also at suppliers here in the US.
Angry Engineer, thing ‘net’.