Ford Slashing Up to 12% of Its Salaried Workforce

May 28, 2008
Just days after announcing it won’t meet a self-imposed goal of turning a profit in 2009, Ford Motor Co. will eliminate as much as 12 percent of its salaried workforce. That was the sobering gist of an announcement delivered by Ford marketing chief Jim Farley during a corporate “town hall” meeting with senior employees.

According to reports, Farley declared the automaker “need(s) to act fast” in order to cope with “a structural change to our economy.”

Last Thursday, Ford CEO Alan Mulally met with reporters and industry analysts on a teleconference to reveal that Ford’s already harsh turnaround plan was falling short in the face of a weakening U.S. economy and record fuel prices. Heavily dependent upon its gas-hungry truck products, such as the Explorer SUV and F-150 pickup, Mulally said, “Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal."

The former Boeing executive acknowledged that even with an economic recovery, Ford has to accept there will be structural changes to the American auto industry. The pickup share of the new car market, for one thing, has dropped from 11 percent to just 9 percent in recent months, and Mulally said he did not believe that even a revival of the housing market will restore the once-booming demand for trucks like the F-Series.

To cope with the current situation, Ford intends to trim between 10 and 12 percent of its white-collar workforce. That could mean as many as 2,000 pink slips among the 24,300 staff in the U.S., Canada, and Mexico. And unlike past cutbacks, the newest round of job reductions will not be voluntary, company officials stated.

The automaker will also consider cutting back the normal, mid-summer merit increases it gives to salaried employees.

No further blue-collar cuts are in the offing -- at least not for now. Asked last week if Ford might consider closing more of its assembly plants, Mulally said there were no such plans in place. But he notedly refused to rule out that option in the future.

Some observers question how much more Ford can continue cutting back while still maintaining its ability to turn out a competitive product line. A resource shortage is being blamed by some observers for the lack of new products for the struggling Mercury division. Pressured by its outspoken investor, the billionaire Kirk Kerkorian – as well as anxious and uncertain dealers – Ford management is reportedly developing a firm strategy to handle the troubled brand. Many observers believe Mercury will be abandoned in a broader corporate consolidation.

Ford is already in the midst of consolidating product development operations in North America and Europe. Going forward, the automaker’s U.S. dealers will be carrying significantly more of the fuel-efficient small cars and crossovers – such as the next-generation Fiesta subcompact – that have helped Ford revive its fortunes on the other side of the Atlantic.

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