Ford Weighs Massive Buyouts in Hopes of Turnaround
The troubled automaker had announced a restructuring plan in January that called for closing seven assembly plants, cutting 30,000 workers and reducing production by 1.2 million vehicles.
But this week, citing people “familiar with the company's plans,” the Free Press of Detroit reported that executives are considering a sweeping buyout program similar to one offered by GM earlier this year. Wall Street analysts praised the GM plan, in which about a third of its hourly workforce agreed to leave, as an effective method of cutting long-term labor costs. A final decision by Ford is expected in mid- to late- September.
Ford is "definitely going to have to try that route," CSM Worldwide analyst Jim Gillette told USA Today. "They need to get rid of workers. The overhang is killing them."
Analysts also told Forbes magazine that Ford–and GM–should reduce the number of vehicles they sell to rental car companies and other corporations.
"The core problem for GM and Ford: too many brands and too many fleet vehicles produced at in too many plants and distributed through too many dealers," said Ronald Tadross, an analyst for Banc of America.
"The bottom line is that it would cost GM and Ford tens of billion of (cash) dollars to fully restructure the businesses properly. The shortest lead time part of the fix, in our view, is to cut back on fleet vehicle sales."
Facing a loss of $1.4 billion for the first half of the year, Ford announced on Friday it would cut by 21 percent the number of cars and trucks it would build in the last quarter. On the same day, several credit rating agencies downgraded Ford.
Meanwhile, Ford workers are eager to know if buyouts are imminent.
Brian Pannebecker, 47, wants Ford to expand its buyouts so he can stay. An hourly worker at the Sterling Axle Plant in Sterling Heights, Mich., he has worked for Ford for 10 years. He told the Free Press that workers who are close to retirement and young workers who can more easily find new careers, are "very eager" to leave. Three of the buyout options are early-retirement programs, while two are targeted at younger workers. Workers in the middle, like he is, want to stay, he said.