Ford's dilemma: Cut costs, build morale

Pursuing 1 goal sets back the other

Ford retrenches
Ford Motor will announce its turnaround plan in January. But the company already has decided to:

  • Eliminate 5,000 salaried jobs in North America by the end of 2001

  • Eliminate one shift (600 jobs) in February 2002 and 84,000 annual units at the Edison, N.J., plant that assembles the Ford Ranger

  • Eliminate merit increases for 2,200 managers in 2002

  •  Increase health care and prescription co-pays for salaried workers in 2002

  • Suspend matching contributions to 401(k) plans as of Jan. 1, 2002

  • Eliminate executive bonuses for 2001

  • DETROIT — Fixing Ford Motor Co. will be harder than William Clay Ford Jr. anticipated.

    “It is absolutely clear that the business conditions have changed since we started this turnaround process,” Bill Ford, 44, said in an interview with Automotive News. “We are going to take tough actions. Everything is on the table.”

    Since taking over as CEO of Ford Motor Co. on Oct. 30, Bill Ford has pledged to mend relations with the UAW as well as the company’s workers, dealers and suppliers. But these goals are running head-on into budget cuts and other turnaround measures. As a result, he is walking a high-wire act as he tries to turn around the 98-year-old family company.

    For example, Bill Ford seeks a new rapport with the UAW. But last week, the company eliminated a shift at its Edison, N.J., assembly plant and laid off 600 hourly workers.

    He says his most important job as CEO is to regain the trust of the company’s employees. But last week, he eliminated merit increases for 2,200 top-level managers and told salaried employees to begin paying health-care premiums and prescription drug co-pays in 2002.

    By mid-January, Ford Motor will unwrap a recovery plan that will reduce its manufacturing base and work force in North America; create a future product schedule bound by stringent cost controls; and refocus the company on producing well-built cars and trucks.

    Last week, Ford Motor disclosed deepening financial problems. The company said it expects to lose 50 cents a share in the fourth quarter. Wall Street earlier had pegged the anticipated loss at 10 cents a share.

    One title or two?

    Bill Ford is relying on his outgoing personality, approachable manner and low-key management style to restore Ford Motor after the tumultuous 34-month reign of ousted CEO Jacques Nasser. But the very attributes Bill Ford needs to smooth relations have made some Wall Street analysts question if he is tough enough to wield the ax.

    “Look, I am in this for my children and grandchildren,’’ Bill Ford said when asked about the criticism. “I’ll be as tough as I have to be, because the viability of this company over the next 100 years is what keeps me going. And I know we are not going to have 100 years if we don’t get the next five nailed down.’’

    Yet, even as he vows to restore the company founded by his great-grandfather, Bill Ford suggested that he might be willing to relinquish the CEO job at some point and retain only the title of chairman. Bill Ford took office as Ford chairman on Jan. 1, 1999. In October 2001, he became the first Ford family member to work as CEO in 22 years.

    “I can see a day perhaps when I was chairman again and not being CEO,’’ he said. “But I don’t really allow myself the luxury of thinking that way because we are in it now, and we are in a tough fight. I am determined to get us through this and on firm footing. What happens beyond that I don’t know.’’

    The Ford Motor board of directors did not discuss a timetable when he assumed the job, Bill Ford said. “I am sure their expectation is that one way or another I will be here a long time. But whether I am the CEO for that entire time, who knows?”

    “In some way, this couldn’t come at a worse timing for me. My four children are all still at home, and there is nothing that I enjoy more than being with them, going to their games, hanging out with them and helping with homework,’’ he said. “Obviously, this job will cut into that. But one doesn’t have the luxury of timing. It came upon us fast. And the board felt I was the best person to step in to help get this ship headed in the right direction.’’

    In the third quarter, Ford Motor’s North American automotive operations posted an $849 million loss, compared with a $782 million profit a year earlier. Through November, Ford Motor Co.’s U.S. market share has fallen to 23.2 percent, down from 24.3 percent a year ago. Sales dipped 6.3 percent in the 11-month period of 2001 compared with 2000.

    Family friction

    Bill Ford repeatedly refers to the “extended Ford family.’’ Yet he is meeting daily with COO Nick Scheele to craft a restructuring that will result in the termination of thousands of jobs, a smaller manufacturing base and stringent cost oversight of suppliers.

    “Other than the relationship rebuilding I have been trying to do, the restructuring plan has taken almost all my time,’’ Bill Ford said.

    Ford Motor already has said it will shed up to 5,000 salaried workers, about 10 percent of its white-collar work force in North America, by year end. Bill Ford would not comment on whether the company expects to increase that number, as some Wall Street analysts anticipate.

    Protecting future product programs is a key aim of the restructuring, he said.

    “It is not to say that we won’t, as we go through the cycle plan, decide that some vehicles we need to pull ahead and some we can delay,’’ Bill Ford said. “But we need to keep the pipeline full.

    “Lincoln and Mercury are areas that we need to concentrate upon, brands we need to help shore up, and we have plans to do so,’’ Bill Ford said.

    Another member of the Ford family, Elena Ford, recently was named Mercury group brand manager. Elena Ford’s mother is Bill Ford’s cousin.

    “We still need to figure out how to be profitable making smaller cars. That’s something we have been working on in this company for as long as I can remember,’’ Bill Ford said.

    Lock in spending

    Ford Motor has not determined how much it will spend to keep the product pipeline filled. “We are close to having that number set in stone,’’ Bill Ford said. “The real issue is what are you getting for that number and where are you allocating those dollars? Are they going to the right brands and the right products?

    “One of the things that was key to the European turnaround was to lock in capital spending. Then lock in the cycle plan shortly thereafter, and don’t deviate. What has hurt us a lot in the last few years, particularly in North America, is a lot of late changes (in products), a lot of cycle plan flux. We need to, and are going to, settle that down.’’

    The key to the recovery is regaining the trust and loyalty of the company employees, Bill Ford said.

    That’s a tall order. Morale is low, an outcome of Nasser’s hiring and promotion practices. In addition to eliminating merit pay and increasing health care payments, Ford Motor suspended contributions to 401(k) plans last week.

    “There is no more important task that I have than to rebuild that trust,’’ he said. “At the end of the day, if your people aren’t with you, it doesn’t matter what plans you have, what your capital spending is, what your new product introduction program is. If your people aren’t with you, you have lost the game. We’re going to get that turned around.’’

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