Ford and Chrysler add to US auto woes
Ford and Chrysler add to US auto woes
The US automotive industry suffered another blow as Ford announced plans to cut a third of its North American workforce and DaimlerChrysler predicted worse-than-expected losses at its Chrysler arm.
By Bernard Simon in Detroit
Copyright The Financial Times Limited 2006
Published: September 15 2006 12:49 | Last updated: September 15 2006 18:34
The crisis at Ford Motor deepened on Friday as the carmaker’s shares plunged following the release of a new restructuring plan that suspended the company’s dividend and pushed back by its target for returning to profitability in North America by a year.
Turmoil in the US auto market also hit DaimlerChrysler, the German-based carmaker, which warned that higher-than-expected losses at its Chrysler unit would slash about €1bn ($1.27bn, £670m) from forecast operating profit this year, sending its shares down 5.5 per cent.
Ford’s latest version of its Way Forward plan - its third restructuring effort in five years - aims at shrinking the company’s North American workforce and speeding up the the launch of new models, especially cars and crossover vehicles.
But Ford stopped short of revealing plans to sell its Jaguar luxury division or its Ford Credit financing unit, and it acknowledged that its share of the US light-vehicle market was likely to erode further from the present 16 per cent to a range of 14-15 per cent. Ford had a 25 per cent market share in the mid-1990s.
Ford shares were trading 12 per cent lower at midday in New York and the cost of buying protection against the risk of a future default by Ford duly rose in the credit derivatives market.
“Ford’s plan lacks the scope in terms of asset sales and falls short of the critical level of strategic commitment to stabilizing financials,” analysts at CreditSights in New York said. ‘’The market is not going to be happy with this plan.”
The carmaker now aims to return the north American operations to profitability by 2009, a year later than envisaged under the original Way Forward plan, unveiled in January.
The latest cost-cutting measures include cutting an additional 10,000 white-collar jobs, and offering buyouts to its entire US blue-collar workforce, as General Motors did earlier this year.
The extra white-collar job cuts combined with 4,000 earlier this year will shrink the north American salaried workforce by about a third.
Nine assembly and parts plants in the US and Canada willclose by the end of 2008.
Bill Ford, executive chairman, said he was less concerned about the possibility of Toyota unseating Ford as north America’s second-biggest carmaker than the importance “for this plan to be based on what I consider to be conservative assumptions.”
Mr Ford said his family, which owns about 4 per cent of the equity and controls 40 per cent of the votes, had no plans to take the carmaker private.
Alan Mulally, the former Boeing executive who took over as Ford’s chief executive earlier this month, added that senior management “is really dealing with this and not waiting for external factors to make it OK”.
Additional reporting by Michael Mackenzie in New York
The US automotive industry suffered another blow as Ford announced plans to cut a third of its North American workforce and DaimlerChrysler predicted worse-than-expected losses at its Chrysler arm.
By Bernard Simon in Detroit
Copyright The Financial Times Limited 2006
Published: September 15 2006 12:49 | Last updated: September 15 2006 18:34
The crisis at Ford Motor deepened on Friday as the carmaker’s shares plunged following the release of a new restructuring plan that suspended the company’s dividend and pushed back by its target for returning to profitability in North America by a year.
Turmoil in the US auto market also hit DaimlerChrysler, the German-based carmaker, which warned that higher-than-expected losses at its Chrysler unit would slash about €1bn ($1.27bn, £670m) from forecast operating profit this year, sending its shares down 5.5 per cent.
Ford’s latest version of its Way Forward plan - its third restructuring effort in five years - aims at shrinking the company’s North American workforce and speeding up the the launch of new models, especially cars and crossover vehicles.
But Ford stopped short of revealing plans to sell its Jaguar luxury division or its Ford Credit financing unit, and it acknowledged that its share of the US light-vehicle market was likely to erode further from the present 16 per cent to a range of 14-15 per cent. Ford had a 25 per cent market share in the mid-1990s.
Ford shares were trading 12 per cent lower at midday in New York and the cost of buying protection against the risk of a future default by Ford duly rose in the credit derivatives market.
“Ford’s plan lacks the scope in terms of asset sales and falls short of the critical level of strategic commitment to stabilizing financials,” analysts at CreditSights in New York said. ‘’The market is not going to be happy with this plan.”
The carmaker now aims to return the north American operations to profitability by 2009, a year later than envisaged under the original Way Forward plan, unveiled in January.
The latest cost-cutting measures include cutting an additional 10,000 white-collar jobs, and offering buyouts to its entire US blue-collar workforce, as General Motors did earlier this year.
The extra white-collar job cuts combined with 4,000 earlier this year will shrink the north American salaried workforce by about a third.
Nine assembly and parts plants in the US and Canada willclose by the end of 2008.
Bill Ford, executive chairman, said he was less concerned about the possibility of Toyota unseating Ford as north America’s second-biggest carmaker than the importance “for this plan to be based on what I consider to be conservative assumptions.”
Mr Ford said his family, which owns about 4 per cent of the equity and controls 40 per cent of the votes, had no plans to take the carmaker private.
Alan Mulally, the former Boeing executive who took over as Ford’s chief executive earlier this month, added that senior management “is really dealing with this and not waiting for external factors to make it OK”.
Additional reporting by Michael Mackenzie in New York
posted by Carlos T Mock @ 10:41 AM
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