After Chrysler cuts, Ford to cut 5,000 jobs

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

Job cuts at Ford likely to increase

Economy is offering no reason to be optimistic, Nasser says
August 20, 2001


BY JAMIE BUTTERS
DETROIT FREE PRESS BUSINESS WRITER



Ford Motor Co. chief executive officer Jacques Nasser said he can't foresee any improvement in the economy that would stop the automaker from expanding its restructuring beyond the 5,000 white-collar job cuts announced Friday.


"We don't see any factor that's going to restore the robustness of the economy" in the next 12 to 18 months, he told reporters in California late Saturday. "We keep asking ourselves what will it be, what action will happen in the economy that will stimulate confidence in buying again, and we just don't see it."


Many in the industry were optimistic this spring that continued interest-rate cuts by the Federal Reserve and a U.S. tax cut would spur a second-half comeback for the economy and the domestic auto industry.


But now Ford is looking at still-sluggish conditions, the $3 billion cost of replacing all 13 million Firestone tires on its pickups and sport-utility vehicles and increasing competition in those highly profitable segments.


Ford announced Friday that it will use early retirement offers to eliminate 4,500 to 5,000 white-collar jobs, or 10 percent of its salaried work force. A broader restructuring will be unveiled by the end of the year, chief financial officer Martin Inglis said Friday.


"This is an initial action," Nasser said of Friday's news of the job cuts. "There will be other actions that we need to take in other areas of the company. It will be how can we do things more efficiently, how can we make decisions more quickly," he told reporters at the Pebble Beach Concours d'Elegance automobile show.


"We'll take the next three or four months to think it through, see what other actions are needed," he said.


Ford is the last of Detroit's automakers to cut its staff to reflect falling market share.


The Chrysler Group, which lost $1.3 billion in the last three months of 2000, has cut 20 percent of its white-collar jobs, closed plants and reduced shifts as part of its three-year, $3-billion restructuring plan to eliminate almost 26,000 positions.


General Motors Corp., after years of declining market share, has cut its salaried staff by 10 percent, eliminated thousands of contract positions and announced the phase-out of the Oldsmobile brand.


More cars and trucks were sold in the first half of this year than most analysts expected. But those sales were less profitable, as automakers used incentives to get rid of inventory and try to retain market share. And Japanese, Korean and German automakers continued to win over buyers, slicing the former Big Three's share of the U.S. market to 66 percent, down from 74 percent a decade ago.


The Federal Reserve Board is widely expected to cut interest rates by one-quarter point when it meets Tuesday. It would be the seventh rate cut of the year and bring the rate that banks charge each other on overnight loans to 3.5 percent, down from 6 percent at the beginning of the year.


But economic growth has been slow, and the tax cut President George W. Bush negotiated with Congress was about 15 percent smaller than he initially proposed.


After an unexpectedly strong first half of the year, GM also expects the rest of the year to be somewhat softer, but with fairly stable production, said spokeswoman Toni Simonetti. "I don't think we're looking for anything dramatic," she said.


It could be dramatically bad, said Saul Rubin, who studies the auto industry for investment bank UBS Warburg in New York, if higher unemployment and lower consumer confidence combine.


More likely is that consumer-spending growth will slow a little. The economy can steer clear of a full recession, but auto-industry sales growth would stagnate.


"While that may not sound so farfetched or dramatic, it would be most painful, in our view, for companies currently losing share while raising incentives," Rubin wrote in a report that predicted Ford will slash its annual dividend from $1.20 to 70 cents per share within 18 months. "This generally describes Ford's position in the marketplace today."