Ford Expected to Make More Buyout Offers

By Staff Report

Sep. 10, 2006

As incoming Ford Motor Co. president and CEO Alan Mulally accelerates the company’s turnaround plan, industry observers predict the automaker will follow in the footsteps of General Motors with a large-scale employee buyout offer.

On September 5, Ford named Mulally, president and CEO of Boeing Commercial Airplanes, to the company’s top post. The appointment came weeks after Ford announced it was cutting fourth-quarter production by 21 percent—about 168,000 vehicles—from last year. As a result, the Dearborn, Michigan-based automaker said it would temporarily halt production at 10 assembly plants in the U.S. Ford is making the cuts because of lower sales and high gasoline prices, the company said.

“We know this decision will have a dramatic impact on our employees, as well as our suppliers,” then-CEO Bill Ford told employees. With Mulally’s arrival, Ford assumes the title of executive chairman.

The move is part of the company’s Way Forward plan, the turnaround strategy Ford Motor announced this year. Under the plan, Ford said it would close 14 factories and cut 30,000 jobs in North America by 2012. But on July 20, the company said it was accelerating the plan, and that details of what that would entail would be released within 60 days.

Ford’s next board meeting is scheduled for Wednesday. Experts believe that mass buyouts, similar to what GM offered to 113,000 of its employees, are likely to be approved at that meeting.

Currently, Ford is offering limited buyouts to employees at plants scheduled to close, as well as to 5,000 employees at Automotive Components Holdings, the spinoff company that is over- seeing the sell-off of Ford’s auto parts supplier, Visteon.

As of August 1, 5,600 employees had accepted buyouts. The company anticipates a total of 10,000 to 11,000 by year’s end, according to Marcey Evans, a Ford spokeswoman.

“We have not made any announcements related to a larger buyout program,” she says. But experts say a bigger buyout is exactly what Ford needs to do.

“I think they are negotiating with the United Auto Workers to establish a larger buyout to all of its workers at all of its plants in the U.S.,” says Sean McAlinden, chief economist and vice president of research at the Center for Automotive Research in Ann Arbor, Michigan. “That would allow them to shut down plants faster than they had planned.”

Speeding up its Way Forward plan is essential not only to appease Wall Street, but also to stabilize employee morale, says Arthur Wheaton, industry education specialist at Cornell University.

The faster Ford can get things settled on the hourly worker front, the faster it can address concerns of salaried employees who are even more anxious because they don’t have labor contracts, he says.

A demoralized salaried workforce could particularly hurt Ford’s effort to be innovative with its designs—something it needs to be competitive, analysts say.

“They need to get some new products out there,” Wheaton says. “They need to be bold.”

—Jessica Marquez

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