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Ford Cuts North American Operations by 25 Percent

Barry Wood
Washington, D.C.
January 23, 2006

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The Detroit-based Ford Motor Company, which has been until recently the world's second-biggest automaker, says it is restructuring its North American operations, which includes closing 14 manufacturing plants during the next six years.

Ford chairman William Clay Ford says his company is determined to restore profitability to its ailing North American operations.

In a televised news conference, Mr. Ford conceded that the company had been caught off guard by a shift in consumer sentiments and had too many large, fuel inefficient vehicles that people no longer wished to buy. He promises to recast Ford as innovative and market-driven company.

Mr. Ford spoke indirectly of the company's intention to reduce its North American work force by up to 30,000 during the next six years.

"I appreciate the fact that winning will require sacrifices by the people of Ford and there will be fewer of us here in the future than are here today," he said. "We take these difficult steps with a sense of compassion and gratitude to those who have served us with all their hearts."

Initial market reaction to the Ford restructuring was positive. The company share price, which has been near a 30-year low, rallied more than six percent on the announcement of cuts that were deeper than had been predicted.

David Cole, the head of the Center for Automotive Research in Ann Arbor, Michigan, says Ford had little choice but to implement a drastic restructuring.

"They are [Ford] looking at it as change or die. They have to shrink to a profitable platform to grow," he said.

The restructuring plan, which also emphasizes product development, will have little immediate cost savings. Ford is bound to costly wage agreements with the autoworkers union and will have to pay laid-off workers for many months after they have been terminated.

The restructuring also does little to address Ford's huge health-care costs, which are similarly tied to its agreement with the union.

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