Ford says 38,000 have taken buyouts

Employees change shifts at the Ford Dearborn Truck plant Wednesday. Nearly half of Ford's hourly workers have accepted buyout offers this year.
Employees change shifts at the Ford Dearborn Truck plant Wednesday. Nearly half of Ford's hourly workers have accepted buyout offers this year.Paul Sancya / AP
/ Source: The Associated Press

John Zaucha spent 34 years at the house that Henry Ford built.

“I was born in that building,” he joked Wednesday, pointing to a now-defunct part of the Ford Rouge plant in Dearborn.

But the 54-year-old resident of Brownstown Township in suburban Detroit said he took a $35,000 early retirement package from his troubled, longtime employer because he believed future cuts to his pay and benefits were possible.

He now plans to work for a pizzeria.

“I wanted to stay another four years, but it’s the right time to go,” the assembly worker said.

Ford Motor Co. said Wednesday that 38,000 hourly workers had accepted early retirement or buyout packages. The Dearborn-based automaker had expected 25,000 to 30,000 to accept the packages, but the reduction leaves the company with just over half of the 83,000 unionized employees it had at the beginning of the year.

Now, say analysts, the nation’s No. 2 automaker needs to rekindle the public’s interest in its cars and reclaim some market share lost to Asian competitors.

“They’ve got to focus on the products that they’re building and they’ve got to build them less expensively ... and until they learn how to do that, this company is going to continue to struggle,” said turnaround specialist Jim McTevia, of McTevia & Associates in Bingham Farms.

Ford lost $7 billion in the first nine months of the year. And it is losing money on a daily basis. The company said Wednesday it expects to burn through $17 billion in cash from 2007 to 2009.

On Monday, it announced plans to mortgage its assets and raise about $18 billion in financing to pay for its restructuring.

McTevia said that move and the buyout figures signal that the automaker believes it will be able to operate profitably in the future. Ford has said it expects to return to profitability by 2009.

But McTevia said Ford faces stiff competition from companies on much stronger financial footing.

Ford’s share of the domestic market has declined from around 26 percent in the early 1990s to 17.6 percent at the end of October. In July, Ford sold fewer vehicles in the U.S. than Toyota Motor Corp. for the first time, but Ford’s U.S. sales have surpassed the Japanese company since then.

Pete Hastings, vice president of corporate fixed income at Morgan Keegan in Memphis, Tenn., said the buyout announcement “represents one step among many on a long road” to Ford’s turnaround. He said the automaker still must address its lost market share and structural costs when it renegotiates with the United Auto Workers next fall.

“They’ll probably need another round of restructuring to adjust to the lower capacity from falling market share,” Hastings said.

But Joe Laymon, Ford’s group vice president for human resources and labor affairs, said the company’s new leadership understands winning concessions from unions isn’t enough.

“We have to also pick up our game,” Laymon said in a conference call with reporters. “This is not just only a company-union deal here in terms of the UAW giving things to us to make sure we are a viable company,” adding that one of Chief Executive Alan Mulally’s priorities is to make sure that “we accelerate the development of what our customers want.”

While workers can change their minds and back out of the buyouts, company officials predicted only a single-digit percentage would do so before their package takes effect. The officials widely credited the efforts of the UAW in helping design packages attractive to workers.

The eight packages offered to hourly employees range from $35,000 to $140,000. Marty Mulloy, Ford’s vice president of labor affairs, said 53 percent of the workers selected nontraditional packages, with the majority taking either lump sum payments or one of two education plans. One four-year package offers up to $15,000 per year for college tuition, plus half of the worker’s salary and health benefits, while another offers to pay 70 percent of pay and tuition for two years.

Those who accepted the buyout packages will begin to leave the company in January, with the window open until Sept. 1, 2007, the company said.

The company expects to cut its annual operating costs by $5 billion through 2008 through a combination of the labor reductions and by also offering packages to 10,000 white-collar workers, with further unspecified reductions in 2009. Mulally in a statement said the reductions will bring manufacturing capacity more in line with lower demand and help the company become more competitive.

Ford spokeswoman Marcey Evans said the company is offering three programs to salaried workers — two early retirement packages and a buyout program. If the salaried workers are offered one of the packages, they are not able to select another, although all of the programs at this point are voluntary, she said.

Offers for two of the programs already have been made, while a third will go out in mid-December, she said.

“We think that the majority of the people who take the voluntary separation packages will do so by the end of the first quarter,” Evans said.

The figures released Wednesday include approximately 30,000 employees who took buyouts during the open signup period that concluded late Monday, plus about 8,000 who took deals offered at limited plants earlier this year. Of the 38,000, about 6,000 are hourly employees at former Visteon Corp. plants that Ford took back from the auto parts supplier earlier this year.

By comparison, General Motors Corp. this year managed to cut 35,000 jobs through buyouts and early retirement deals. It also sealed an agreement with the UAW that requires employees to contribute more toward their health care to lower the company’s structural costs.

“I don’t know what it says for our local economy because there are a lot of people who take these buyouts who will leave our area” to find work elsewhere, McTevia said.

Rouge plant assembly worker Mike Prater said he plans to travel after receiving his early retirement. The 52-year-old Dearborn resident walks gingerly and said his hand doesn’t work right anymore. His feet are killing him.

“Walter Reuther said 30 years and out,” Prater said of the legendary UAW president, “and working in a place like that for 30 years, walking on solid concrete, takes a toll.”

Ford shares rose 2 cents to close Wednesday at $8.17 on the New York Stock Exchange.