Nearly half of Ford Motor Co.'s hourly workers will leave the company by Sept. 1, boosting cost-cutting efforts at the second-largest U.S. automaker as it aims to become profitable by 2009.
Ford said yesterday that 30,000 more workers accepted buyouts ranging from $35,000 to $140,000 that were offered in October to all employees represented by the United Auto Workers union.
That number, plus the 8,000 union workers who accepted buyouts at select plants earlier this year, means that 38,000 union workers will be leaving the automaker and that Ford has exceeded its goal of cutting 25,000 to 30,000 blue-collar jobs by 2008.
Ford started the year with 83,000 union workers in the United States.
Burnham Securities analyst David Healy called yesterday's announcement that 30,000 more union workers had accepted buyout and retirement offers "a shot of good news," but he said Ford still suffers from a vehicle lineup that is "competent but boring as hell."
"They now have their financial ducks lined up, and they just have to bleed for two to three years before new models come along and they can close plants," Healy said.
Among those taking buyouts was Carl Bryant, president of Local 551 at the Torrence Avenue plant in Chicago, who was eligible to retire with full pension benefits because he has 30 years at the plant. Bryant, 53, said he will become a full-time minister at a church in East Chicago, Ind.
"It's an assortment of younger and older workers who are leaving. Some have less than 10 years, and others have 30," Bryant said. "It's a mixture."
The plant has about 2,400 union workers, and Bryant said with more than 900 leaving, he doubts the plant could run two shifts without hiring replacements.
"Right now, Ford is about saving money," he said of expectations that Ford could bring in temporary workers. Some UAW workers who were laid off also could be called back, he said.
"We honestly don't know yet whether we will need to use temporaries," Ford spokeswoman Marcey Evans said. "It's too early to tell."
The blue-collar cuts at Ford will exceed those at General Motors Corp., which plans to close 12 North American plants by 2008. About 34,000 UAW workers at GM accepted buyouts earlier this year, and about 30,000 have already left.
Another 14,000 UAW workers at bankrupt supplier Delphi Corp. took buyouts, raising the number of voluntary departures by UAW workers this year to 86,000. The union had nearly 600,000 members at the beginning of the year.
$13 billion cost
Ford said in a Securities and Exchange Commission filing yesterday that it expects to burn through $13 billion in cash over the next three years to pay for the departures, plant closings and operating losses in its struggling automotive operations.
The company will spend about $3 billion in cash in the fourth quarter alone on its automotive operations, which have accounted for most of its $7 billion in losses through the third quarter.
Ford announced Monday that it was seeking $18 billion in financing, using its factories and other assets as collateral, to increase its cash reserves to $38 billion by year-end.
The company said yesterday that it expected to have $25 billion left by the end of 2009 and that it will continue to spend about $7 billion annually on new products over the next three years while it restructures. Ford will close 16 North American plants by 2012.
Ford no longer provides an earnings guidance but said it expectedto make a slim profit in 2009 as it shrinks its work force, cuts costs and prepares for a smaller share of the U.S. market.
The Ford, Lincoln and Mercury brands currently hold 16.7 percent of the market, but the company expects that to decline to 14 percent to 15 percent by 2009.
Workers will leave between Jan. 1 and Sept. 1, and some UAW members will move back to Ford plants from parts supplier Visteon Corp. Visteon was spun off by Ford in 2000, but UAW members who worked in Visteon plants remained Ford employees.
Healy, the Burnham analyst, says the mass exodus of UAW workers will save money because temporary workers can fill in at plants that are scheduled to close at lower cost than permanent workers.
Lower pay, no benefits
Temporary workers are paid $18.50 an hour without benefits, compared with $27 an hour for permanent UAW workers who also receive generous benefits.
Even with the cost savings, Ford still faces a rough road to recovery, Healy said. The $18 billion in secured debt Ford is taking on, for example, will increase the company's interest expense, already inflated because Ford's bonds are rated junk or below investment grade.
"The bottom line on an operating basis is going to look terrible until 2009," he said, adding that there is no quick fix on the product side.
"The problem is that this is a long lead-time business, so any decisions they make now [on new products] won't be in showrooms for at least two years, probably three or four," Healy said.
More job cuts are coming at Ford, with the next round aimed at getting white-collar workers to accept retirement or buyout packages. Ford plans to cut 10,000 salaried workers by 2008 and expects most to leave voluntarily by the end of March.
Ford has said it may have to fire workers if enough don't leave voluntarily. About 4,000 white-collar jobs were cut in the spring, most of them voluntary departures.
Rick Popely writes for the Chicago Tribune.