Supercharger

With the plant closings negotiated in its new UAW contract, Ford Motor Co. will meet its goal of trimming North American production capacity by nearly 1 million units. But it has not solved all its production problems. At least two one-shift plants - Wixom, Mich., and St. Louis - will remain in the plant lineup. One-shift plants, with their half-time use of tools and equipment, are inherently inefficient.

Still, Ford has made progress on cost cutting with the latest moves. The plant closings, along with other planned plant changes, could save Ford an estimated $1 billion a year, analyst Rod Lache of Deutsche Bank said in a report. That will contribute to Ford's turnaround goal to improve pre-tax profits by $9 billion a year by mid-decade from where the company stood in 2001.

Under the turnaround plan, Ford had said it would reduce North American-installed capacity from 5.7 million units annually to 4.8 million with plant closings and other actions, such as line speed reductions. Last year, the company sold 3.4 million Ford, Lincoln and Mercury vehicles in the United States, Mexico and Canada.

The shift reduction and plant closings announced last week will account for about 464,000 units of capacity, according to estimates based on 2002 data from Harbour and Associates of Troy, Mich. Ford would not disclose how much capacity reduction would come solely from the UAW-negotiated actions.

"All of this helps us to adjust capacity to meet customer demand, and in the process, we are becoming more efficient." said Roman Krygier, group vice president of manufacturing and quality, in a conference call last week.

Meanwhile, Ford last week also moved to cut more production capacity in Europe. The automaker canceled tooling for the next-generation Focus at its factory in Genk, Belgium, a move that will slash capacity there to some 300,000 units a year from 450,000.

With the withdrawal of the Focus from Genk, Ford has cut nearly half a million units from its western European passenger car capacity since discontinuing production of the Ford Escort at Halewood, England, in July 2000. That leaves it with about 1.4 million units of Ford-brand production capacity, more in line with its actual sales last year of 1.3 million.

Garel Rhys, director of the Center for Automotive Research at Cardiff University in Wales, calls Ford's global situation grim. "I think Ford is in the worst position it's been in since the early 1930s," he says. "They appear to have no bolt-hole where they can go to regroup. They're disintegrating in Australia and on the verge of disappearing in Latin America. Europe used to be the big profit center that offset the pressure from GM in North America. Now that has failed. That is a major disaster to the group bottom line."

Ford still has room to improve manufacturing efficiency and upgrade dated plants in the United States:
St. Louis was saved from the chopping block last month in a last-ditch effort by the UAW and Missouri officials, but it shrinks to one shift in mid-2004. The plant assembles the Ford Explorer, Mercury Mountaineer and Lincoln Aviator SUVs.

The huge Wixom site is protected from closure during the next four years, but no new products have been announced. Wixom assembles the Lincoln LS and Town Car and the Ford Thunderbird, which will be dropped after 2005.

An aging, landlocked plant near Atlanta gets new vehicles as a result of the contract. But the perennially productive Atlanta work force has no guarantee it will get a greenfield replacement plant, an investment Ford studied but put on hold this year. Still, Atlanta will assemble Mazda6-based sport wagons for Ford and Lincoln beginning in August 2006. Atlanta now makes the Ford Taurus and Mercury Sable.

FamilyGuy

I didn't realize how much trouble they are in. Since they have Lincoln and Mercury, part ownership of Mazda, and big chunks of Volvo, Aston Martin, and a handful of ther players - if they go, they're going to take a lot of manufacturers down with them.

On one hand, it doesn't bother me much, because I think they're losing money by making inferior products. In general, I like competition. On the other hand, that's a ton of jobs down the tubes, and that always sucks.

RobDickinson

They own outright :
Jaguar (loosing cash)
Land rover
Aston Martin
Volvo
And have a 30% stake in mazda.

FamilyGuy

Thanks, I forgot about Jaguar and Land Rover.

Red Devil

I don't completely understand the accounting implications, but Ford and GM both have apparently underfunded their pensions, and it has gotten each of them in debt by over 10billion for the near future. This was all in the Wall Street Journal around 5-6months ago. Anyway, the way the article read, the author was making an argument for how close to the brink of bankruptcy both are.

atr_hugo

I still don't understand how the Japanese fund their pensions (or if they even have them - which, if they don't, could explain the differences in US and Japanese personal savings rates).

The big three are all in the same boat in regards to pension issues and while closing plants helps current fixed cost struggles the pensions are fixed costs that won't go away.

Ford has to bring better product to market and particularly has to hit a home run with the new F150 (it's the cash cow).

Based on a series of drives in new F150s against most of their competitors (the Nissan Titan has not been out long enough to test) the F150 is the best of the bunch, fortunately for Ford.

Ford is about to release several new sedans, the 500 and the Futura among them, which should bring them back into the 'car' business.

Ford owns about 34% of Mazda, enough so, that according to Japanese law, they have a controlling interest.

BTW, the thing most people don't realize is Toyota is within spitting distance of eclipsing Ford as #2 in global sales. Yikes!