updated 6/5/2008 4:17:55 PM ET 2008-06-05T20:17:55

Even though employees knew the dreaded e-mail would be coming, the fear became more real on Thursday when it popped up on computers at Ford Motor Co. offices across North America.

The company notified workers it will cut white-collar salary costs 15 percent by Aug. 1, and an unspecified number of people will lose their jobs.

“This unfortunately will result in involuntary separations of Ford employees and agency personnel as well as cost savings through attrition and the consolidation of open positions,” President of the Americas Mark Fields said in the message.

The cuts are in response to shrinking U.S. automotive sales brought on by $4 per gallon gasoline and a rapid shift to smaller vehicles from Ford’s traditional moneymakers — pickup trucks and sport utility vehicles.

Ford spokeswoman Marcey Evans said the company had no target number of employees to cut, but each department has a salary cost-cutting goal.

CEO Alan Mulally said Ford needs to keep sizing its operations to match demand, cutting costs as it continues to invest in new, more fuel-efficient products.

“We’ll come out the other side of this with a company that is competitive, with the products that people want, and we’ll start to grow again,” he said in an interview Thursday with Detroit radio station WWJ-AM. “But in the near term, we’re just so sorry that we have to see some of our employees leave the operation.”

Mulally said the company didn’t offer buyout or early retirement packages this time due to costs and because packages had been offered previously.

“We’re trying to reduce the total cost of our operation, and so it seems that’s the best way to that now,” he said.

Efraim Levy, a senior industry analyst with Standard & Poor’s, said a 15 percent reduction might not be enough given declining sales of the F-series pickup, which last month was dethroned as the nation’s top-selling vehicle.

“The pickup truck is no longer No. 1, and the profits are in the pickup trucks,” Levy said. “So you’ve got to cut costs — fat and muscle sometimes.”

But Mulally said the company is doing the right things.

“I think it’s important to do it decisively also so that we can continue to have the money to invest in the new products and services going forward,” he said.

The Dearborn-based automaker had 23,700 salaried workers at the end of last year. The company has cut the white-collar work force in North America by 10,800 since the end of 2005, mostly through attrition, early retirement offers and voluntary buyouts.

Ford announced May 22 that it was cutting North American production for the rest of this year and no longer expects to return to profitability by 2009. The company’s sales fell 16 percent in May compared with the same month last year and were down 11 percent for the first five months of the year.

Although Ford made $100 million in the first quarter, it lost $15.3 billion during the previous two years and had to mortgage its assets to stay afloat.

Evans said workers who lose their jobs would get standard severance packages based on their years of service.

The cuts, reported Thursday by the Detroit Free Press, will not be applied uniformly through the company, Evans said.

“Each department has its own task. It’s not an across-the-board sort of application,” she said, declining to say which departments might see larger cuts.

Levy said Ford is smart not to cut as deeply in areas such as engineering where new, smaller vehicles are being developed.

“You don’t want to cut your engineering staff too much,” he said. “The comeback needs to be product-driven to be successful. Without that, it’s just a vicious cycle of production cuts and employment reductions.”

He sees a risk of further cuts as the market keeps shifting from trucks to cars.

“It’s a powerful shift,” he said. “It catches the domestic brands in a weaker position than their Asian competitors.”

Ford plans to cut production by 15 percent in the second quarter, 15 to 20 percent in the third quarter and 2 to 8 percent in the fourth quarter. The cuts will primarily affect pickups and SUVs, which have seen sales plummet in recent months due to rising gas prices and the slowdown in new home construction.

The F-series pickup, the top-selling vehicle in the U.S. since June of 2005, was dethroned in May by cars from Toyota and Honda. F-series sales were off nearly 19 percent through May.

But Ford plans to increase its production of cars and crossovers through additional shifts and overtime. Ford’s smallest offering, the Focus sedan, saw sales jump 35 percent in the first five months of this year. The company sold more than 32,000 Focuses in May, and it’s scrambling to increase the output of the lone assembly plant that makes the subcompact.

Ford isn’t the only company to make cuts because of the U.S. market shift. General Motors Corp. earlier this week announced that it would close four pickup truck and SUV factories. Chrysler LLC made production cuts earlier in the year, and industry analysts say more may be in the offing.

Ford shares slipped 6 cents to $6.40 in late afternoon trading.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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