Ford says 38,000 have accepted buyout or early retirement offers

Wednesday, November 29th 2006, 9:49 am
By: News On 6

DETROIT (AP) _ Almost half of Ford Motor Co.'s hourly production workers _ 38,000 so far this year _ have accepted buyouts or early retirement offers as the nation's second biggest automaker shrinks in the face of multibillion-dollar losses and fierce competition from Asian carmakers.

The figure includes approximately 30,000 buyouts during the open signup period that concluded late Monday, plus about 8,000 who took deals offered at limited plants earlier this year.

Also Wednesday, the Dearborn-based automaker said it expects to post cumulative cash outflows of about $17 billion during the 2007 to 2009 period.

Faced with lower demand for its products, Ford had hoped that 25,000 to 30,000 workers would sign up during the just-expired round of buyout offers so it could reduce manufacturing capacity to better match demand. The number who did was at the top end of that range.

The 38,000-worker reduction this year would amount to nearly 46 percent of the 83,000 unionized employees that Ford had at the start of the year.

Ford shares slipped a penny to $8.14 in afternoon trading on the New York Stock Exchange.

Those who accepted the buyout packages will begin to leave the company starting in January, the company said.

The eight packages offered to employees ranged from $35,000 to $140,000 depending on their years of service, age and how close they are to retirement. One four-year package offered up to $15,000 per year for college tuition, plus half of the workers' salaries and health benefits. Another offer paid 70 percent of employees' salaries and tuition for two years.

``One of Ford's priorities, and a large cost component of our `Way Forward' plan for North America, is our ability to adjust manufacturing capacity with demand, while continuing to reduce operating costs and becoming more efficient,'' Ford President and Chief Executive Alan Mulally said in a statement. ``While I know that in many cases decisions to leave the company were difficult for our employees, the acceptances received through this voluntary effort will help Ford to become more competitive.''

The latest buyout enrollment period began in October. The offers included traditional packages for employees eligible for retirement, as well as nontraditional packages for employees with at least one year of service.

The company said just more than half of the employees accepted the nontraditional packages, which provided options such as lump-sum payments, tuition reimbursements or scholarship funds for family members.

Pete Hastings, vice president of corporate fixed income at Morgan Keegan in Memphis, Tenn., said the buyout announcement ``represents one step among many on a long road'' to Ford's turnaround. He said the automaker still must address a loss of market share and structural costs that he said are imposed by unions when it renegotiates with the United Auto Workers next fall.

``They'll probably need another round of restructuring to adjust to the lower capacity from falling market share,'' Hastings said.

``They face tremendous challenges. It's going to be tough for them to achieve the turnaround. It's certainly a multiyear process, and I'm sure we'll see plenty of changes in the upcoming months.''

Ford lost $7 billion in the first nine months of the year, and the company on Monday announced that it plans to get about $18 billion in financing due to negative operating cash flow and to pay for its restructuring. Ford's share of the market has declined from around 26 percent in the early 1990s to 17.6 percent at the end of October.

The company expects to cut its annual operating costs by $5 billion through 2008 through a combination of the reductions in hourly workers and by also offering packages to 10,000 white-collar workers, with further unspecified reductions in 2009.

In a filing Wednesday with the Securities and Exchange Commission, Ford said more than half of its projected outflow would happen in 2007, including automotive operating-related cash outflows of about $10 billion and cash restructuring expenses of about $7 billion.

Ford said the cash expenses primarily reflect the expectation of substantial operating losses in its automotive operation through 2008 and employee separation costs.

In a note to investors, Bank of America analyst Ronald Tadross said the numbers are $6 billion worse than his firm's estimate and do not indicate the company planned aggressive action such as cutting multiple product brands, reducing its fleet mix or upgrading plant flexibility.

``So, our model is under review, and we expect the stock to trade down on this news,'' Tadross wrote.

Ford spokeswoman Marcey Evans said the company is offering three programs to salaried workers _ two early retirement packages and a buyout program. If the salaried workers are offered one of the packages, they are not able to select another, although all of the programs at this point are voluntary, she said.

Offers for two of the programs already have been made, while a third will go out in mid-December, she said.

``We think that the majority of the people who take the voluntary separation packages will do so by the end of the first quarter,'' Evans said.

Ford has announced plans to close 16 plants as part of the ``Way Forward'' restructuring plan. Nine of the plants have been identified, but the company has not named the remaining seven.

The company has said it doesn't expect to return to profitability until 2009, and that things would get even worse in the fourth quarter as market share continues to drop and Ford pays for further plant closures and job cuts to bring its manufacturing in line with lower demand.

In the SEC filing, Ford said it expects to log fourth-quarter operating-related cash expenses of about $3 billion and restructuring cash expenses of $500 million to $1 million.