Are Buyouts Coming to Ford Employees?

After the latest round of bad news for Ford Motor Company, analysts and employees at the troubled American automaker expect the company to aggressively cut fixed costs by offering buyout packages to most, if not all of its U.S. factory employees.

In announcing a $254 million second-quarter loss early this month, the company pledged to speed up reorganization plans and has announced production cuts to keep expenses in check. It announced last week that it will cut fourth-quarter production by 21 percent, a move that will require temporary layoffs of some factory employees.

Ford had previously stated plans to close 14 plants and eliminate as many as 30,000 factory jobs by 2012. But those cutbacks may come more quickly.

Analysts say Ford needs to make the production and personnel cutbacks permanent if it hopes to make the turnaround toward profitability, and many believe an announcement on personnel cutbacks could come soon.

"I think it's going to happen. I don't really think they have a choice," said Rebecca Lindland, automotive analyst with Global Insight.

Ford has refused to comment on any potential buyouts, and United Autoworkers Union, which represents about 82,000 Ford employees, also refused to comment on any of Ford's restructuring plans.

But media reports and analyst speculation suggest that long-time employees would be in line for a $100,000 payout, but possibly forfeit all future health coverage and other benefits. More recent hires would receive $15,000 for college and have their health benefits continued while they attend school.

Many of the white-collar and blue-collar jobs targeted for buyouts are likely held by workers making somewhere in the neighborhood of $100,000 annually, according to Lindland and fellow auto analyst John Wolkonowicz.

"One-hundred thousand really isn't that much when you add in health expenses," Lindland said.

During the last several years, Ford and General Motors have seen a steady erosion of their U.S. market share as Japanese automakers Toyota and Honda achieved steady gains. The shift was underscored in July, when Ford for the first time sold fewer vehicles than Toyota Motor Corp. in the United States.

GM, however, has moved more aggressively to limit their fixed costs. In May, about 35,000 hourly workers at GM accepted buyout or early retirement offers. The company had previously announced a plan to cut its 113,000-person U.S. hourly work force by 30,000, closing 12 plants by 2008. The company now expects to reach its job reduction target by Jan. 1, 2007, about two years ahead of schedule.

"GM has certainly taken the hits they need to take, and they made them quickly. Ford is taking what looks like a slower, kinder, gentler tactic, and it's not working," Lindland said.

The expectation is that Ford will stick near the initial plan of about 30,000 job cuts, but accelerate the process and complete the buyouts long before 2012.

The analysts said Ford must also improve a product line that has become less appealing to consumers in recent years. While longtime staples like the Ford Mustang have continued to sell, high gas prices this summer caused a slip in small and medium-sized SUV sales. The challenge, the analysts said, will be to overcome consumers' negative impression of U.S.-made cars and create a new products that are accepted by younger car buyers.

"They need to cut costs and increase revenue, but they also need to improve their products. They've done distressingly little on the product side," Wolkonowicz said.