[Virtual_Insanity]

Ford Board to Consider Restructuring Plan
Wednesday, December 7, 2005 7:23 PM EST
The Associated Press
By DEE-ANN DURBIN

DETROIT (AP) — Ford Motor Co.'s board of directors began a two-day meeting Wednesday to consider a sweeping restructuring plan the company hopes will help pull it out of a slump. Thousands of jobs are on the line and several plants may shut down to help the nation's No. 2 automaker overcome rising costs and the loss of market share to foreign rivals.

Ford has at least eight assembly plants at significant risk of closure for many reasons, including the products they make, their age, their proximity to suppliers and the flexibility they have to produce a variety of products, according to auto analysts from consultants Global Insight Inc. and IRN Inc., and restructuring firm Conway, MacKenzie and Dunleavy. The plants employ more than 17,000 hourly and salaried workers.

Tom Hoyt, a spokesman for Ford, wouldn't discuss details of the restructuring Wednesday, saying the plan hasn't been completed. But the board was holding a regularly scheduled meeting in Dearborn, Mich., and one of the items on the agenda is the restructuring plan.

The automaker is expected to reveal the plan on Jan. 23, according to United Auto Workers Vice President Gerald Bantom, who is in charge of negotiations with Ford. Bantom said he had no details of the plan, but industry analysts say Ford must take major steps to get its plant capacity in line with falling U.S. demand for its vehicles.

Ford used only 86 percent of its North American assembly plant capacity in 2004 compared to rival Toyota Motor Corp., which is running at full capacity, according to the Harbour Report, which measures manufacturing productivity. Ford has around 23 assembly plants in North America.

"This is not something that is going to be trivial. This has got to be substantial restructuring," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

At the top of the list for closure is the St. Louis plant in Missouri, which makes the struggling Ford Explorer and the Mercury Mountaineer. Explorer sales were down 30 percent in the first 11 months of this year despite an extensive redesign.

Also high on the list are the Atlanta, Ga., plant and the Twin Cities plant in St. Paul, Minn. Atlanta makes the Ford Taurus sedan, which is scheduled to be phased out next year, while the Twin Cities makes the slow-selling Ford Ranger pickup. A plant in Cuatitlan, Mexico, which makes F-series trucks for the Mexican market, also is at risk, analysts said.

"All four of those plants are very vulnerable," said Catherine Madden, a production analyst with Global Insight. "Idling these would make significant improvements in capacity."

Two plants in Ontario, Canada — St. Thomas Assembly and Oakville Assembly — could be at risk because Ford will want to show the United Auto Workers that it's not confining cuts to U.S. plants, said Erich Merkle, a senior auto analyst with IRN. Merkle said Ford could decide to move sedans from Canada to an at-risk plant in Wixom, Mich., which makes the Lincoln Town Car, or it could decide to close Wixom and move the Lincoln products to a plant in Chicago.

Merkle also said Ford may want to shuffle its truck production and close the Michigan Truck Plant in Wayne, Mich., which is often idled because of slumping sales of sport utility vehicles.

Analysts don't always agree. Chuck Moore, director of Conway, MacKenzie and Dunleavy, said at least one of the four U.S. plants producing F-series trucks — in Michigan, Kentucky, Missouri and Virginia — could close and production consolidated.

But Madden and Merkle said the F-series is so important to Ford — and such a big seller — that it likely will keep all four plants running. Ford sold nearly 812,000 F-series trucks in the United States in the first 11 months of the year, the most sales for any individual vehicle.

"Ford is the F-series, essentially," Merkle said.

Ongoing negotiations with local and state governments also could affect the outcome. In Georgia, officials say they'll ask the state assembly to keep the plant open through tax breaks and other incentives. But Rebecca Lindland, an auto analyst with Global Insight, said Atlanta's Hartsfield-Jackson Airport also may want to buy the land the plant sits on in order to expand.

The analysts agreed that any Ford plan must include money to update remaining plants so they can build a greater variety of vehicles. Some of Ford's plants already are highly flexible, including a truck plant in Dearborn, Mich., which can build up to 16 different models. But for the most part, Ford has fallen behind rival General Motors Corp. in plant flexibility, which hurts its ability to respond to market demands, analysts said.

"If there is not a significant amount of capital investment, I would really question the feasability of the plan," Moore said.

Ford also faces the risk that investors won't be satisfied with any turnaround plan. Last month, GM's plan to close 12 facilities and cut 30,000 jobs was greeted with a yawn on Wall Street, which said the automaker must take even more significant actions to return to profitability. Ford reported a $1.2 billion pretax loss in its North American operations in the third quarter.

Ford shares were up 9 cents to close at $8.20 on the New York Stock Exchange. They have traded in a 52-week range of $7.57 to $15.

It is sad that Ford has so much relying on just the F-150 truck to survive as highlighted above but I am sure we all knew this for awhile now.Good reliable products sell and Ford needs those too not just a truck.I hope Ford wakes up real soon as it isn't looking good from all of the latest reports.
Feel free to comment on this latest news report.

 

[S. on Da 5]

Where is the love.

 

[SilverSVT]

Wow they are really throwing Darts out there...just to show the Press' negtively towards ford..they state that ford lost 1.2 B in North America, yet overall had a 1.8 B in Profit from its Globial operations

Oakville isnt going anywhere..they are getting the Edge and Aviator next spring and theres a possibitly that they might get the New people movers based on the Fairlane concept if they close both Wixom and Atlanta. The Lincolns would goto Chicago

St Thomas isnt going anywhere either...they will prob wind up getting the Town Car and they build the CV and GM, which are still important to Ford.

 

[Sonic04SVT]

It's very hard to make any changes when the domestic companies are forced into paying $140/hr/employee just to bolt something together, most foreign companies are only paying $30-50 on average to do the same. That $140 is the combined cost of wages and benefits plus the job bank $ that the UAW has some how negotiated over the years. Tell me 1 job out there that any high school kid without training or a degree can pick up and recieve the equivalent of $140/hr benefits total? No wonder more and more US based car companies are building their cars over seas.

The UAW has insane health care benefits (I think they pay %7 of the total cost compared to the salary workers who pay around %30 for example) and their wages start at $25/hr, they also are so specialized that they only do 1 thing at 1 plant. Let's say your job is to tighten lug nuts and your getting paid $30/hr (some are making a lot more), if there are no lug nuts to be tightened at your plant, you sit and do crosswords for $30/hr until there are some lug nuts to tighten, even if that is months or years out. The domestic car companies cannot even have them do a different job or go to another plant, there are several thousand people that have been getting paid full wages with full benefits that have no work to do for a year or more. I think GM is going to have over 9000 this year, that’s $2,620,800,000 worth of crossword puzzles for the year ($140/hr *40hrs * 52 weeks * 9000 people).

How can you even think of competing when your losing this much $ to nonsense like this? Not to mention that fit and finish has not been the forte of the US auto companies, it’s been like paying for a specialized physician to do some work and you’re getting a veterinarian.

Now before any union supporters flame me, I used to be in a union also (John Deere) when I was going to college. I hated it then because our leaders promoted sloth to keep the averages low so that nobody had to work, I was literally yelled at by the Union president for waking him one day while putting away parts with a fork truck which I did not think was right at all (not to mention he had full health care and was making over 3x what I was). My experiences are not the only ones out there like this either, I have talked to many people who have had similar feelings. Now, I agree that there was a time when unions were not only making working conditions better, but they were actually saving lives and for that I applaud and thank them for their service. However, in this day and age unions are not needed.

I think the UAW is a very real reason why the domestic car companies are lagging behind. If something does not happen soon we will not have any domestic car companies, I will not put the full blame on the UAW because obviously management has some control over the situation (they should have never given these benefits out in the first place), but its also hard to fault management because who knows what kind of cars would be out there today if they did not have these high costs. I’ll give you an example, supposedly $2500 off the top of every sell of a GM vehicle goes to UAW health care. If this was more inline with the rest of the nation that might mean there would be another $2k freed up for GM to use better materials, more time spent on design or more engineers involved, more customer research, more available options etc.. Ford is in the same situation, it’s really time for a change.

 

[uujjj]

The $140/hr isn't the pay. It is pay plus benefits plus an amortization of expected future retirement benefits plus the benefits paid to former employees. It isn't fair to claim that they are paid $140/hour.

The problem with unions isn't the pay. I think workers being well-paid is a good thing. And while the benefits are a burden, they aren't the main problem.

It is the work rules, the job classifications, hiring rules, firing rules, grievance procedures, mandatory breaks, overtime rules. These are what makes running unionized plants such a pain. Unfortunately, the people who negotiate union contracts don't take into account the productivity loss from these rules. When given a choice between concessions on wages and concessions on hiring rules, they'll give in on the latter even though sometimes it does more damage.

But at the end of the day, it isn't because of the UAW that Ford makes boneheaded product decisions (like not redesigning the US model Focus). That's what Ford really needs to fix; the UAW is just a nuisance in comparison.

 

[Sonic04SVT]

The $140/hr isn't the pay. It is pay plus benefits plus an amortization of expected future retirement benefits plus the benefits paid to former employees. It isn't fair to claim that they are paid $140/hour.

That is why in my post I said:

"That $140 is the combined cost of wages and benefits plus the job bank $ that the UAW has some how negotiated over the years."

Still, do you really think that $140 per employee is a realistic and acceptable amount for someone who does not even have a degree or any professional skills? I don't have the numbers but isn't total benefits generally 2x the wage, aka $25/hr means $50 total cost to employ the person.

Also lets look at only the wages since this was brought up...do you think that tightening lug nuts is a skill set worth paying $25 and hour for? Because there are UAW workers that get paid that amount to do that work, I would bet there are some getting paid substantially more then that. Before you answer keep in mind your entry level engineer with a bachelor degree starts out at around this wage, and that’s a lot more technical and demanding job.

Look at it another way, if %20 of your auto assembly workers walked out one day, how long would it take to train others to replace them?

Now what would happen if you lost %20 of your engineering group, how long do you think it would take to replace them in comparison?

The problem with unions isn't the pay. I think workers being well-paid is a good thing. And while the benefits are a burden, they aren't the main problem.

It is the work rules, the job classifications, hiring rules, firing rules, grievance procedures, mandatory breaks, overtime rules. These are what makes running unionized plants such a pain. Unfortunately, the people who negotiate union contracts don't take into account the productivity loss from these rules. When given a choice between concessions on wages and concessions on hiring rules, they'll give in on the latter even though sometimes it does more damage.

I agree with you on the rules, but I still think the pay and benefits are WAY out of line. Toyota averages $30/employee total benefit cost for their assembly line employees (and the average assembly time is like 1hr shorter and they have a high rating for fit and finish), its no wonder they are about to become the #1 automotive company, they have nearly 1/5th the cost to assemble things. If something doesn't change, all assembly will be moved overseas where they can get their assembly cost competitive. That's not good for the US, but neither is making it too expensive to build here.

But at the end of the day, it isn't because of the UAW that Ford makes boneheaded product decisions (like not redesigning the US model Focus). That's what Ford really needs to fix; the UAW is just a nuisance in comparison.

Like I was saying before, who knows what Ford or GM would be like today if they had not been making all these concessions to the UAW. If their cost structure was like Toyota's they could have spent more money on research, model updates, options, refinement, etc... If they were not paying these large amounts for workers the profit per vehicle would go up, which means more $, which means the cost to bring the euro focus here might have easily be feasible.

Again, it’s not all the UAW and the management have blame for this also, but I think they have hurt things a lot more then anyone wants to admit. Seriously, how can anyone justify paying out $2.1 billion for people to sit around and do nothing? (http://www.detnews.com/2005/autosinsider/0510/17/A01-351179.htm, Delphi is GM's main supplier)

Keep in mind this is why we are having the "fire sales" events now, it’s cheaper for GM and Ford to grossly overproduce their vehicles and sell them cheaply then it is for them to just pay people to sit around and do nothing. This in the long run also devalues the vehicles and the company, which in turn lowers sales, everyone thinks they must be crap if they are giving them away. There is a lot more to this but I'll stop there.

 

[uujjj]

GM and Ford are hardly the first companies ever to "dump" production at fire sale prices. I'd say Asian manufacturers in steel and electronics are the ones who perfected the practice.

The $140/hr is a number you've pulled straight out of your butt. The real number is on the order of $60. What is your source?

UAW pay/benefits is very much in line with what Toyota pays, and less than what Toyota pays back in Japan. Toyota workers start about $20/hour and get fully paid health care and pensions approaching those at GM. I've know of non-union hourly workers at Toyota making as much as $121,000 in wages alone. Toyota pays dearly for its labor; they just use less of it because their factories are more labor-efficient.

 

[Sonic04SVT]

GM and Ford are hardly the first companies ever to "dump" production at fire sale prices. I'd say Asian manufacturers in steel and electronics are the ones who perfected the practice.

The $140/hr is a number you've pulled straight out of your butt. The real number is on the order of $60. What is your source?

UAW pay/benefits is very much in line with what Toyota pays, and less than what Toyota pays back in Japan. Toyota workers start about $20/hour and get fully paid health care and pensions approaching those at GM. I've know of non-union hourly workers at Toyota making as much as $121,000 in wages alone. Toyota pays dearly for its labor; they just use less of it because their factories are more labor-efficient.

I can't find the $140 number out there, but its been used in many forums debating this topic and nobody has ever refuted it. I think your "ballpark" number of $60 might be the number without job banks and so forth, there is also A LOT of room for that number to grow considering that UAW employee's have a $5 copay on all drugs (not just generic, the name brand ones, in fact that was on of the things mentioned that maybe if they switched to generics it could save a ton of $). $20/hr is not the average wage, its more like $25 or more, there are janitors making $25/hr and fork truck operators making an average near $50/hr:

http://www.detnews.com/2005/autosinsider/0508/09/A01-274912.htm
http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

This one talks of Delphi, which is GM's main supplier and states they pay $76/hr/employee and that this is double what competitors pay:
http://www.freep.com/apps/pbcs.dll/article?AID=/20051126/BUSINESS01/511260313/1002/BUSINESS

About Toyota, Japan has National free health care, so Toyota essentially gets a freebie on health care costs on vehicles built in Japan. Also, Toyota does not pay for their retiree's benefits after 2 years either but the domestic companies continue to do so. The wage may be competitive but the benefits are not, or at least they are not when compared to cost paid by the company. Here is an article:
http://www.autoweek.com/news.cms?newsId=102080

And here is more info about healthcare costs and so forth:
http://www.univ-evry.fr/PagesHtml/laboratoires/gerpisa/rencontre/11.rencontre/papers/Mercer.pdf

And if all of this is still not convincing, here is an article talking about how GM only gets $8.66 per employee and Toyota makes $69 per employee, if nothing else it should be painfully obvious that something needs to be changed with the UAW. Toyota is making 8 times more $ from their employee's then the domestics are with the UAW....
http://working.canada.com/atlantic/...ectors/story.html?s_id=7gA2vGUFwboFNShsZ+rCu3rQkFgww+YrwZnRkIdS+DowPlNO/qxvLw==

There are tons more articles out there if you want to look at them, they all pretty much say the same thing, UAW workers are over paid and are crippling the domestic car companies. At first I also thought this was overblown and just a scapegoat, but the more I read the more I am convinced. I mean just look at GM's 2005 5.6billion dollar health care fund budget...and then realize that %40 of those workers are going to be retiring soon, which means health care will start to rise even more over the years for those retirees. It's just insane.