Ford Plans Massive Layoffs

In response to a tough economy and a decline in demand for SUVs and pickups, Ford is going to "cut salary costs by 15%" by Aug. 1, sources said.

”Cutting salary costs” is industry-speak for white-collar workers losing their jobs, though Ford won't put a number on just how many employees will be affected.

"The cuts and the impact will be large," a Ford source said without elaborating on the number of workers. Some have already been notified, and the rest will be by Aug. 1.

A rumor has also surfaced that not only will salaried workforce be cut, but those remaining will be forced to take a hefty pay cut. That announcement is supposedly going to be made soon on a "Black Friday."

One source disputed that.

"Salary costs will be cut, but salaries won't be cut, and it will happen on an incremental basis by Aug. 1, not on one single day," the source said.

"When the F-Series truck is your main source of revenue, yet sales are down 19%, you don't have a lot of choices,” said Rebecca Lindland, associate director of consulting firm Global Insight. “Either find another source of revenue or cut costs."

Ford has already announced a shift to using global products in the U.S. in the very near future, which would reduce R&D costs. We’ve already seen cuts made at factories and among the company’s hourly workforce. Usually when that happens, salaried workforce is next. With more products developed globally, Ford won’t need as many people in downtown Dearborn as it did before.

"With the market in chaos now and with no other source of revenue, Ford has to cut the payroll to achieve any gain,” Lindland said. “And to cut salary costs by 15% means there has to be a significant cut in the white-collar workforce."

Comments

Ford needs to keep it's workers on payroll and design 2 more economical cars, in addition to the Focus. Stop crying how consumers aren't buying the F-150.

Unfortunately for Ford their problems go back much further than the recent energy crisis. They made a huge mistake in the original redesign of the Taurus back in the 80s. When that model flopped allowing Honda to take over first place in car sales a bell should have gone off somewhere. Instead, the Corporation became fat and happy selling their bloated SUVs and trucks which was all fine while it lasted. Their bright star has certainly faded to the point where it's almost invisible. I hope the company can reinvent itself before they get crushed by the competition, sadly it may already be too late!

Unfortunately for Ford their problems go back much further than the recent energy crisis. They made a huge mistake in the original redesign of the Taurus back in the 80s. When that model flopped allowing Honda to take over first place in car sales a bell should have gone off somewhere. Instead, the Corporation became fat and happy selling their bloated SUVs and trucks which was all fine while it lasted. Their bright star has certainly faded to the point where it's almost invisible. I hope the company can reinvent itself before they get crushed by the competition, sadly it may already be too late!

Actually when the Taurus fell off its pedestal the Camry took over as the best-selling car in America. The F-150 remained the best selling vehicle, until gas prices knocked it down. Now the Honda Civic is the best selling car.

If I were in charge of Ford, I would have used global platforms 10 years ago - this is what Toyota and Honda have been doing. It doesn't take a genius to figure this out. I also would have continually invested in maintaining a presence in small cars, even if they didn't sell well. The Focus, while good when it first came out, has been left in the dust by the competition. 2010, two years from now, is very late (again) for Ford to begin to clean up their act. Why is it that there is only one model with a hybrid? The Escape? Even GM has multiple hybrid models. Of course GM has multiple everything, but that's another story.

Those who continually decry Ford, and GM, and Chrysler fail to recognize the grave disadvantage they had against Toyota, et al due to the UAW contract. The costs killed them.

A worker could theoretically RETIRE at age 48 (after 30 years) and the company would have to pay their pension and medical costs, including the retiree's family, for another 30 to 40 years. That's untenable when the competition does not face that cost.

You also had union work rules not faced by competitors. Toyota, Honda etc could cross train employees and move them as necessary. In UAW shops everything was controlled by seniority and people could not just be shifted around. Further, pay was dictated by time with the company rather than skill level. A fork lift operator could be making more than a guy assembling computer aided engine controls.

Because of things like the above the foreign brands could make carts like the Corolla and Civic in the USA at a profit while American brands would break even. There's a reason that the American companies opened plants in Mexico. There's a reason that Ford will build the new Fiesta in Mexico. It's the UAW.

One would think that the union would get a bit smarter and work with the employers. The recent contracts offered some relief. But then the union went and struck the one GM plant with a success - the Malibu. Somehow I don't think the UAW will feel truly successful until it puts the US makers out of business and all its members out of work.

Don't think that can happen? Take a look at the United Steel workers managed to do to the US steel industry.

The UAW cost is just an excuse! If GM-Ford-Chrysler would have SOLD cars like the Japanese the cost of the UAW would be a non-issue. In order to SELL cars you have to make them attractive, reliable, and build them with quality. The FORMER Big 3 never did such. Toyota and Honda have proven they are the real American car companies. They build high quality cars and trucks and Americans have rewarded them for such.

Karl: did it ever occur to your that the difference between "high quality made in the USA" and "low quality made in the USA" boils down to 3 letters?

It seems that lots of foreign car companies can open plants in the USA and make "quality cars". Toyota, Honda, Hyundai, BMW, Mercedes, etc. They seem to be missing 3 letters.

Those letters are UAW.

Interestingly, VW opened a plant to make Rabbits in the USA in the 70s. The cars that came out of that plant were lemons. They were so bad that VW had to close the plant and discontinue the Rabbit name. Of course that VW pant was a UAW one.

When's the last time you heard of Isuzu. They were quality Japanese cars. They opened a USA plant in the 80s. It was a disaster. One thing that separated the Isuzu plant from Toyota etc was that Isuzu chose to be a UAW plant.

Perhaps you would like to ask Hyundai about their experience with the CAW in Canada. They were forced to close the plant to remain competitive. Now it's in Alabama.

Funny that those "lousy" American car companies can do quite well in other markets, like Europe, where they're on a level playing field with competitors. Same goes for Asia. It seems that the only place they have a problem is right here, the land of the UAW.

"If GM-Ford-Chrysler would have SOLD cars like the Japanese the cost of the UAW would be a non-issue."

They did sell cars like the Japanese! GM sells the more cars in the US than anyone else. Ford only recently dropped to third place: they're still much larger than Honda. Inferior quality is definitely part of their problem, but the benefits they gave to the UAW workers have really hurt them.

I don't want to burst any GM bubbles around here but if fleet sales were not counted GM would be in second place behind Toyota.
Go compare the stock price of Toyota, Honda, and GM as it's not even close. The only thing GM has accomlished since the 1980's is LOSING more than 20% of marketshare. I recently read on the one of the posts that Toyota is now worth 16x more than GM. I checked it out and it is true. Holy Cow!

Plenty of blame to go around here. What's the solution?

Troy,
The solution is the market will make the correction. That's what great about capitalism. The weak die off, the strong survive, the end consumer benefits. In laymens terms the public has sent the message that GM, Chrysler, and Ford suck, but that Toyota and Honda are good.

The solution does rely on reading the markets correctly applying the appropriate resources to win in those markets. The problems that the US automakers face are years in the making and will take awhile to sort them out. Shoddy quality, lack of interesting designs, which are well documented. Traditionally cheap gas prices in the US and the slowness for the US automakers to react to the signs of the impendng gas hikes.

Yes the UAW has their share of the blame. All you need do is compare the quality and productivity of UAW vs non-UAW plants in the US. C'mon, when GM spends more on health care for its workers and retirees than they do on steel for the products they sell ... there is a problem.

I would like to see some leadership come out of Detroit on gas alternatives ... GM seems to be saying a lot of the right things "Gas-Friendly to Gas-Free", but it will come down to execution. In the fuel cell space, the main competition may not be Toyota and Honda, but rather China, Inc.