IE 11 is not supported. For an optimal experience visit our site on another browser.

Ford offering buyouts to all hourly workers

/ Source: The Associated Press

Ford Motor Co. will offer buyout and early retirement packages to 54,000 U.S. hourly workers in an effort to cut costs and replace those leaving with lower-paid workers. Thursday’s announcement came as Ford said it narrowed its losses in 2007 but warned that the outlook for U.S. sales in 2008 remains grim.

Ford President and Chief Executive Alan Mulally said the automaker will also trim salaried staff, mostly through attrition but possibly through layoffs, as it tries to adjust to a slumping U.S. market. Ford said its U.S. market share will be at the low end of a 14 to 15 percent range in 2008, down from 14.8 percent in 2007 and 26 percent a decade ago. Ford fell behind Toyota Motor Corp. in U.S. sales last year, ceding its 75-year position as the nation’s No. 2 auto seller behind General Motors Corp.

“We are going to match our production capacity to the real fundamental demand,” Mulally said during a conference call with Wall Street analysts and media.

Ford lost $2.8 billion, or $1.30 per share, in the fourth quarter, narrower than a loss of $5.6 billion, or $2.98 per share, in 2006. The full-year loss of $2.7 billion, or $1.35 per share, was significantly better than 2006, when Ford lost $12.6 billion, or $6.72 per share.

Mulally said Ford remains on track to make a profit in 2009, but is expecting another loss in 2008.

“Overall, our plan is working and we continue to show progress,” Mulally said.

Mulally said the United Auto Workers agreed to two rounds of buyouts for hourly workers. The first will be offered immediately to fewer than 1,000 remaining workers who had been employed at already closed plants in Atlanta, St. Louis, Edison, N.J., and Norfolk, Va. Those offers close the week of Feb. 28 and employees would leave the company by March 1.

The second round of buyouts would go to workers at all other U.S. Ford locations, opening Feb. 18 and closing the week of March

17. Mulally said those workers would likely leave the company starting April 1, with all of them gone by year’s end.

The buyouts come in addition to a 2006 round of buyouts in which 33,600 U.S. hourly workers left the company. This time around, they could be replaced with lower-wage workers. Under Ford’s new contract with the UAW, which was signed in November, Ford can pay new workers $14.20 per hour, or about half the wages of a current worker. Under the contract, up to 20 percent of Ford’s U.S. hourly work force may be paid at the lower wages.

UAW President Ron Gettelfinger told reporters at an event Thursday in Detroit that the union agreed to the packages and knows that Ford wants to bring in more lower-paid workers.

“We knew what we were doing when we went into it, but we also recognized that the companies did need help,” he said.

Ford wouldn’t say how many people it hopes will take the offer, but Chief Financial Officer Don Leclair said Ford has about 12,000 U.S. workers eligible for retirement, or about 22 percent of its hourly work force. Ford is offering eight different packages for employees, including a $50,000 lump-sum payment for non-skilled workers and a $70,000 lump-sum payment for skilled workers. That is sweeter than 2006, when non-skilled workers were offered a $35,000 lump sum.

Leclair said the company will continue to reduce its salaried work force in 2008. Ford has cut the number of full-time salaried workers in North America by 10,800 since the end of 2005. It had 23,700 salaried workers at the end of last year.

Chuck Moore, a director at the Detroit restructuring firm Conway, MacKenzie and Dunleavy, said Ford probably won’t see tens of thousands of workers leaving as it did during the last round of buyouts.

“The reality is that those that were concerned before left, and now you’re left with people who were not concerned about their jobs,” he said. “But this is a free throw. Whatever they can get is going to be of benefit.”

Dearborn-based Ford reported revenue of $44.1 billion for the fourth quarter, up from $40.3 billion in the year-ago quarter. The company reported full-year revenue of $172.5 billion, up nearly 8 percent.

Excluding one-time special items, Ford lost 20 cents per share for the quarter and 19 cents per share for the year, in line with Wall Street’s expectations. Analysts surveyed by Thomson Financial had predicted a loss of 19 cents per share for the quarter and 17 cents per share for the year. Special items included a $705 million charge for separation programs in North America and a $208 million gain from the sale of Aston Martin.

Ford shares fell 12 cents to $6.18 in afternoon trading Thursday.

The company lost $3.5 billion for the year in its North American automotive operations, narrower than a loss of $6.0 billion in 2006. Ford said higher net pricing and lower costs helped offset losses from lower sales and unfavorable exchange rates. Full-year revenue for the region was up 2 percent to $70.5 billion.

In the fourth quarter, Ford lost $1.6 billion in North America, compared with a loss of $2.7 billion in the year-ago quarter. Fourth-quarter revenue was up 13 percent to $17 billion.

Ford’s U.S. sales took a hit in 2007 when it reduced low-profit sales to rental-car fleets by a third. Leclair said Ford will continue to cut fleet sales in 2008, but not by as high a volume. Excluding fleet sales, Ford’s U.S. market share in 2007 was 12.8 percent.

Ford’s Premier Automotive Group, which includes the luxury Jaguar, Land Rover and Volvo brands, posted a full-year profit of $504 million, compared with a loss of $344 million a year ago. Ford doesn’t break out results for the brands, but said Volvo lost money. Ford recently decided to keep Volvo but is planning to sell Jaguar and Land Rover. Earlier this month, Ford selected Indian car maker Tata Motors Ltd. as the top bidder for the two British brands.

One bright spot was South America, where 2007 earnings more than doubled to $1.2 billion. But Leclair said Ford had trouble meeting demand in the region and said the record profits were unsustainable.

Analysts were cautiously optimistic about Ford’s results.

“We view net pricing as positive and see progress in restructuring, but with our outlook for weak U.S. volume through 2008, we see turnaround efforts as fragile,” Standard and Poor’s auto analyst Efraim Levy said in a note to investors.