Ford plans sequel to Way Forward

Ailing auto giant aims to hasten turnaround

July 21, 2006|By DETROIT FREE PRESS

DETROIT -- Brace yourself for Way Forward II, the sequel.

After losing $1.3 billion during the first half of the year - a performance that is $3.5 billion worse than the same period of 2005 - Ford Motor Co. said yesterday that it would accelerate its Way Forward turnaround plan and take "additional actions" within the next 60 days to keep its effort on track during challenging times.

"We will, in a couple of months, have for you an updated version of Way Forward," Ford Chairman and Chief Executive Officer William Clay Ford Jr. told reporters and analysts in a conference call to announce the company's second-quarter financial results.

Ford said it lost $123 million in the April-June period. Analysts, on average, had expected a profit of about $220 million, excluding charges for buyouts.

Will the new plan have more or earlier plant closures? More benefit cuts? Broader buyout programs? More changes to the product plan? Management changes?

What, exactly, is on the table? The answer, according to Bill Ford, is simply, "Everything."

Ford could even examine an alliance like the one General Motors Corp. is studying with Renault SA and Nissan Motor Co.

"I wouldn't rule it out," Ford said in an interview later in the day on CNBC. "Would we be open to talks? Yes, we would."

The promised revision to the Way Forward plan comes six months after Ford unveiled the original plan, which a few analysts had criticized for lacking urgency and detail.

The initial turnaround plan spanned six years, through 2012, and promised to idle 14 plants, eliminate 34,000 jobs and take other actions to restore Ford's North American automotive operations to profitability by 2008.

Seven of the remaining plants slated to close have still not been publicly identified.

While Ford didn't suggest that the Way Forward plan would be scrapped in lieu of a new strategy, he said the company was conducting a detailed review of its strategy and would make changes soon.

"Our top priority is to fix our business," Ford said.

There is one element of the Way Forward plan that workers and analysts alike would like to see quickly modified.

Several have complained that Ford's buyout program has been offered to workers at only a few plants. So far, 5,000 workers have taken buyout programs to leave Ford and the company is hoping to shed 12,000 by the end of the year, said Don Leclair, Ford's chief financial officer.

A sweeping program at General Motors Corp. allowed that automaker to cut its UAW labor force by about 35,000.

Analysts and workers eager to leave Ford have been nagging for the company's buyout program to be extended to all its facilities.

"We would like to see Ford engage in a companywide attrition program similar to GM's," Himanshu Patel, an automotive analyst with J.P. Morgan, wrote in a note to investors last week.

Mark Fields, the executive vice president charged with turning around Ford's struggling American operations, said the changes to come might include quickening the timetable of some of the Way Forward provisions already announced, but he would not reveal what he was considering.

"We're looking at every element ... which means going potentially further, and faster and deeper than we originally envisioned," Fields said. "If we need to move further and deeper, we will."

Perhaps the best thing Ford could do to improve its outlook and performance is get new, desirable vehicles to market faster. Last week, Merrill Lynch estimated that, among major automakers, Ford would have the oldest lineup of vehicles in its showrooms, with an average vehicle age of 3.5 years. Showroom age is considered a major indicator of market share performance.

Ford car sales are up 5.3 percent for the year, but truck sales look like a sea of negative numbers. Overall sales of pickups, SUVs and vans were down 9.3 percent. Lincoln truck sales are down 19.8 percent overall. Sales of the Ford Explorer and Expedition SUVs are both down more than 30 percent.

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