‘Way Forward’ for Ford looking long and hard

Roland Jones Business news editor • Profile • E-mail

At this year’s North American International Auto Show in Detroit, Ford CEO Bill Ford, facing a loss of North American market share to Asian rivals, said that automaker has “a lot to do, and some of it will be painful.”

Although few knew it at the time, Ford’s prediction was on the money. The nation’s second-largest automaker said Monday it would cut 25,000 to 30,000 jobs and idle 14 facilities by 2012 as part of a restructuring designed to reverse a $1.6 billion loss last year in its North American operations and bring it back to profitability by 2008.

The details of the firm’s restructuring plan, dubbed the “Way Forward” by company officials and Ford’s second in four years, have been the subject of much speculation in the media for some time. When Ford finally unveiled the plan Monday, it was broader than many had predicted. Still, analysts say it remains to be seen whether the huge job cuts and plant closures will be enough to get the company back in gear.

“Unfortunately, I didn’t hear any more than I thought I would hear from Ford today,” Brett Hoselton, an automotive analyst with KeyBanc Capital Markets, told CNBC Monday. “Plant closures, job layoffs … that’s just more of the same from Ford.”

Hoselton said he would have liked to hear Ford’s executives discuss their product development program — a part of the business where drastic changes are required.

“What you’re finding in the automotive business is the products you design today affect your profitability three to four years down the road,” Hoselton said. “What we are seeing today is some pretty good changes at General Motors, but nothing like that at Ford, and I think Ford is really going to be in dire straits in five to 10 years from now.”

Like its U.S. rival GM, Ford has struggled in recent years with a loss in U.S. market share to Asian rivals, a decline in sales of its large SUVs because of higher gasoline prices and a crippling healthcare bill and pension costs for its U.S. workforce and retirees.

Ford’s latest restructuring comes two months after GM’s own move to temporarily remove the cloud of bankruptcy hovering over the world’s largest automaker. In November, GM said it plans to cut about 9 percent of its global work force, and close nine North American assembly plants and three service and parts facilities to slash $7 billion of expenses in 2006.

Ford and GM face similar problems, and the solutions to those problems are likely to be similar too, notes Rebecca Lindland, an automotive analyst at consultancy Global Insight. “They both need to get union concessions, manage costs and start producing really great products,” she said.

FORD REVAMP: FULL COVERAGE Ford to cut up to 30,000 jobs, idle 14 plants Analysis: Ford faces a long and hard road   CNBC video: Ford CEO details cuts Vote: Can Detroit fix its problems? Ford's earnings rose in fourth quarter Georgia plant among those to be 'idled' Union: Ford plan 'disappointing'

Lindland was encouraged by Ford’s pledge Monday to focus on the consumer. “They have a good base to start from,” she said. “Consumers like the Mustang and the F-150 truck and they are selling as many as they can build, especially on the Mustang side. So they have the capabilities there, it’s getting that to pervade the whole rest of the company that will be the real challenge.”

However, Lindland said in some areas Ford’s plan was “disappointingly vague,” particularly when it comes to the plants it plans to close. Ford said it will idle 14 plants by 2008, but only announced the names of a handful involved.

“That is something you think they’d have a definite idea about,” she said. “It suggests to me they still have a learning curve in terms of discovering what America wants from cars and trucks, and you wonder how long it will take them to understand the products consumers want and respond to that.”

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