Ford to cut cost of salaried workers 15% by Aug. 1
The auto industry's putrid performance in May was an eye opener, and companies like Ford now have to readjust the adjustments they just made to their turnaround plans. Ford VP Jim Farley already braced his white-collar work force for a possible 12% reduction in their ranks, but a memo emailed today by Mark Fields, Ford's President of the Americas, reveals that the number of white-collar workers "reduced" will actually be 15%. Fields says in his memo (full transcript posted after the jump) that the company will "reduce salaried-related costs in North America by 15 percent by Aug. 1," which you, me and the guy who sits in the cubicle right under the AC vent know doesn't mean just cutting back on coffee filters.
The reductions will come from a series of steps that should ruin the day for lots of Ford employees wearing a tie or pants suit right now. They include "involuntary separations" (i.e. firings, letting go, RIFs, etc.), attrition (I'm leaving before you can fire me) and a consolidation of open positions (you now do his, his and her job plus what you were doing before). Other cost saving measures include further delaying merit-based raises from July 10th to Oct 1st (the Griswolds will not be going to Wally World this summer), suspending tuition assistance and dependent scholarship programs (education, not so much), and capping company-paid retiree basic life insurance for all existing and future retirees at $25,000 (that's still enough to buy a KISS Kasket for you and your spouse). As our esteemed colleague Mr. McElroy said a few posts ago, "It's a pretty grim picture. And it certainly is going to get worse." And so it has.
[Source: The Detroit News, The Detroit Free Press]
Email memo from Mark Fields
SUBJECT: Detail on Business Plan Updates
Two weeks ago, we announced that rapidly deteriorating business conditions – and a dramatic acceleration in consumer shifts away from large pickups and SUVs to smaller cars and crossovers – have made it necessary for us to accelerate our North America transformation plan.
While the fundamentals of our North American business are stronger than they were when we started our recovery effort more than two years ago, we're facing new and greater challenges as an industry. Lower industry volumes and segment shifts, together with the cost of steel and other commodities, directly affect our bottom line. As we previously announced, we no longer expect Ford North America to return to profitability in 2009.
Clearly as we've seen business conditions deteriorate in North America, it's important for us to act. In addition to realigning production, we need to bring costs in line. As one element of that, we've had to examine salaried-related costs. In keeping with our commitment to communicate decisions first with employees, today I'd like to share the actions that we will need to take.
Our plan is to reduce salaried-related costs in North America by 15 percent by Aug. 1. This unfortunately will result in involuntary separations of Ford employees and agency personnel, as well as cost savings through attrition and consolidation of open positions. We won't know the exact number of job reductions until each function examines its business needs and determines how best to meet their specific cost-reduction targets.
We also are making some employee compensation and benefit changes to further reduce costs.
These include:
• A further delay of merit increase payments for employees in the U.S. and Canada from July 1to Oct. 1;
• An immediate suspension of the U.S. Salaried Tuition Assistance Program;
• An immediate suspension of the U.S. Salaried Dependent Scholarship Program; and
• A $25,000 cap on company-paid Retiree Basic Life Insurance for previously eligible existing and future U.S. salaried retirees, effective Aug. 1. ...
Health care benefits, 401(k) matching funds and other benefits remain unchanged, along with our commitment to keep you informed of the latest challenges.
We realize the effect these actions will have on you and your families. While this has been a difficult period for all of us, it's important to remember our hard work in recent years has positioned the company to better withstand these challenges.
The new products we've launched during the past two years have been successful in the marketplace, and we are on plan with our commitment for 70 percent of our Ford, Lincoln and Mercury lineup to be new or significantly upgraded by the end of this year – and 100 percent by the end of 2010. We have not announced new products beyond that time frame – but we absolutely remain committed to the second part of our plan, which is to accelerate the development of new products that customers want and value.
In the near-term, we already have announced expanding the use of our fuel efficient six-speed transmissions, adding new fuel-saving EcoBoost engine technology in 2009, bringing a new European-engineered Transit Connect in 2009 and the new Ford Fiesta small car in 2010.
We've also shown tremendous progress and resolve in cost reductions and are on track to meet our goal of taking $5 billion in cost out of the system by year-end, while delivering quality products on par with the best in the business. Going forward, we will begin to fully realize the benefits of our more competitive contracts with the UAW and CAW as well.
Ultimately, we believe we have the best plan for facing these industry challenges. And we know that companies that deal with these market realities with the greatest sense of urgency and the best executions of their plans will succeed. We've already seen this as we transformed Ford in Europe and South America. With even greater resolve, we can do the same in North America.
As managers, you will receive cascade materials later this morning to help you in conducting discussions with employees about these actions. Thank you for all your hard work.
-- Mark
Reader Comments (Page 1 of 1)
Brian 5:13PM (6/05/2008)
Wow I thought cuts were only made at the bottom level assembly plants! They were probably over paid anyway.
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geo.stewart 5:40PM (6/05/2008)
dont know that they were 'overpaid'. as with any business, some will be some wont be.
wonder if they will do like the union and picket and block the entrance or if they will just get on with their lives and search for jobs elsewhere like responsible adults.
Sean 11:02PM (6/05/2008)
How about they cut the salaries of the CEO's and focus groups that have cost them all those hundreds and hundreds and hundreds of millions of dollars.
That One Person 10:29AM (6/06/2008)
Uh Geo...engineers and such don't have unions. If they block the entrances and picket (meaning they aren't doing their job), they get a swift kick out the door.
The thing I heard most about when I was doing my internship at Ford was the wanting of more job security. People were ushered out the door (almost on a daily basis) by Ford security and told never to come back.
I know my uncle has resumes ready and is looking for somewhere else to work. And I know more than half the people I worked with are gone (by their own accord).
Joshua Schnable 5:24PM (6/05/2008)
Let's all celebrate by going out and buying a bunch of Hondas and Toyotas!
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Wally 5:30PM (6/05/2008)
When reached for comment Ford Execs said, "Would you like to buy an Explorer or F150? Buy one get one free! Anyone? Please?"
That number could have been a lot worse if the Focus wasn't selling so well. Now bring us your Euro Spec vehicles, ya dummies!
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kory kickul 5:48PM (6/05/2008)
it should be buy a focus and get an F-150 for free........
GENERALMOTORSMAN4LIFE 5:50PM (6/05/2008)
Well, I used to work for Ford in Dearborn and the majority (98%) of the engineers weren't engineering anything. This 98 percentage of engineers instead stood around the water cooler discussing T-time scores and family trips to they're cottages and summer homes up in Northern Michigan. The problem I had and still have is that this behavior was prevelent all through Ford in areas of vehicle design, testing and engine development which are all critical to vehicle reliability, longevity and safety. I hope the people who DID APPLY themselves and DID DO they're jobs don't get caught up in this!
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PiCASSO 7:43AM (6/06/2008)
As a Tier 1 supplier, I was fortunate enough to work with a few Ford employees on the P356 and P415 programs who didn't have the time to stand around and sip their coffees. These guys worked typically 55-60 hours a week, excluding the weekend work at the plants when called for. Perhaps these guys picked-up the slack from those 98% you've mentioned.
Devil 5:49PM (6/05/2008)
So let us get this straight, last year, so many salaried workers wanted to take the buyout Ford had to revoke their offer and retain them.
Not even a year later here they are firing the salaried workers they wouldn't let take a buyout last year?
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bakka 5:50PM (6/05/2008)
Look for jobs else where as responsible adults??????
Hmmm.
Hmmmm.
Where would they look for work? Wally world? Mc d?
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geo.stewart 9:19PM (6/05/2008)
other manufacturing, other marketing, other engineering jobs. skills apply to different industries.
now, if you are talking union, and you are saying that they are too dumb to learn to swing ahammer at anything else or use a torque wrench on construction machinery, I'll disagree but you may have better knowledge of those guys.
The whole textile industry shut down here. People either found jobs in other industries or re-trained, and without a 70K+ payout to pay for it.
iCameiSawiConquered 5:54PM (6/05/2008)
Hmm talk about great advertising to get talented people not to join your company.
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Xcountryflyer 7:08PM (6/05/2008)
Heaven knows why anyone would want to work for a US airline or a US automaker...
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bakka 7:17PM (6/05/2008)
Odd too, because on April 16 there was a story on AB about a hiring binge from the big 3.
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KT 7:59PM (6/05/2008)
@Devil
There were very few that were asked to stay. The "good" employees that had the chance to take a buyout were asked to stay...others were shown the door.
This go'round it's based on performance and seniority. If you lack either or both you're a candidate for dismissal. The last time it was more focused on getting those that could retire to go ahead and do it.
To me this latest reduction is odd because it's the 30yr folks that make the most money and generally use more insurance but they are pretty much excluded from the pool of potential dismissals. It would seem logical to entice more of them to retire (not using buyouts as in the past) thus saving more money (salary/benefits) by eliminating fewer people.
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LDMAN 10:47PM (6/05/2008)
"We're working to global standards," says plant manager Kevin Whipp. "The only difference is you see more people here." http://news.bbc.co.uk/2/shared/spl/hi/pop_ups/07/business_ford_india/html/1.stm
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whofan 8:06AM (6/06/2008)
"To me this latest reduction is odd because it's the 30yr folks that make the most money and generally use more insurance but they are pretty much excluded from the pool of potential dismissals. It would seem logical to entice more of them to retire "
The experience Ford has in development lies with in its` people.
You need the experienced work force to stay until the younger workers gain it. In theory tour right.
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Wildgoosechase73 11:40AM (6/06/2008)
What this indicates is a long term shift away from the US auto market. The big 3 can't compete at their current volume in the small car market. The growth in the industry is in China and Russia. I'm afraid we will see a lot of burly autoworkers in Walmart aprons very soon.
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Big John 12:06PM (6/07/2008)
That's a really poorly written headline. That doesn't say "15% laid off", that says "15% reduction in salary".
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