Ford Motor weighs turnaround options

Everything is open for discussion to solve problems

DETROIT - Ford Motor Co. won't ask the UAW if it can permanently close plants in the next two years, but COO Nick Scheele said the company is wrestling with how much annual production capacity it needs in the next decade.

Meanwhile, Jim Padilla, the new group vice president for North America, wants to establish a predictable schedule for new products to avoid poor launches and quality problems.

Scheele and Padilla must find answers to Ford Motor's problems by mid-January, the deadline for crafting the automaker's turnaround plan.

The company has indicated everything is on the table for discussion, including asset sales.

Last week, analyst Wendy Needham of Credit Suisse First Boston predicted steeper job cuts than the company has announced. Some analysts also argue Ford Motor must pare vehicle production capacity .

But last week, Scheele signaled that any immediate production reductions likely will be accomplished through shift or line speed reductions, not plant closings in North America.

"Clearly, we have to respect our contractual agreements, and we will,'' Scheele said, referring to the automaker's contract with the UAW that extends through September 2003. The contract prohibits plant closings.

Scheele added that the company's market share won't be a top priority in the turnaround plan. "I never look at market share," he said. "We all have (share gain) aspirations. They probably add up to 160 percent of the market."

War games

Scheele said he is employing "war game'' teams to determine how much capacity Ford Motor should have in the next decade, the industry's likely sales performance and the products the automaker will need to compete.

Deciding how many units of annual production Ford Motor should keep is a critical issue, Scheele said. Ford Motor's cost structure, product plan, staffing levels and other operating questions will flow from that decision, he said.

"What is the industry trend, and what capacity do you want to have in that industry? Those are the two key pillars,'' Scheele said in informal remarks to reporters last week.

The company is reeling from financial losses, market share decline, dwindling cash reserves and a string of product defects. Already this year, the company has halved its dividend, eliminated executive bonuses and announced the elimination of 5,000 salaried jobs in the United States by year-end.

In Europe, Scheele helped revived the automaker's fortunes by remaking the manufacturing base and recasting the product lineup. For example, he closed the Dagenham assembly plant in England, raising capacity utilization to more than 90 percent in four remaining plans. At the same time, he invested $500 million in the Dagenham engine plant to increase diesel capacity by 100,000 engines a year.

At the end of 2000, the company's average plant utilization in North America was the highest of the Big 3: 108.4 percent of capacity. The Chrysler group's was 90 percent and General Motors' was 97.8 percent.

Seeking consistency

Ford Motor also wants to improve the use of its plants.

Padilla said the company needs a more discliplined product schedule to launch, freshen and later redesign each vehicle. Toyota Motor Corp. and Honda Motor Co. Ltd., for instance, keep a disciplined product plan.

"We've probably been a little helter-skelter and not consistent enough,'' Padilla said. "You've got to have a product plan that endures over time. We've got to do three things: stabilize, standardize and deliver with cadence in manufacturing and product development.

"Consistency lets you launch product on time, with quality and on budget.''

Padilla, who headed Ford Motor manufacturing before leading North America, worked alongside Scheele in the 1990s at Jaguar, when the pair turned around that critically ill company.

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