Ford Joins GM on the Brink
The American manufacturing sector took another body blow today as Ford announced massive layoffs beginning in 2007. As many as 30,000 employees at 14 Ford plants in North America, up to 21% of the company's hourly workforce of 82,000, could be impacted by 2012.
The announcement by the #2 American automaker comes within weeks of similar devastating cuts at General Motors. As at GM, the United Auto Workers agreed to dramatic reductions in health care benefits at Ford, shifting expenses to employees in a move designed to slash Ford's $3.5 billion health care bill. That agreement, inked only six weeks ago, did little to save UAW members from the axe that fell at Ford today.
While UAW foes such as Rich Lowry of the National Review blame bloated unions and overpaid workers for the decline of Ford and GM, the data tells another story. Health care and pension costs may indeed contribute up to $1500 per vehicle, but it is rejection by customers in the market place and not union compensation that has left Ford staggering and vulnerable. Ford auto sales have contracted each of the last six years, a drop over 1 million vehicles since 1999. Worldwide, Ford market share has shrunk to 18%, down from 25% a decade ago. While Ford's Mark Fields spouts a new mantra he calls "red, white and bold", the company's reputation for stodgy design and failure to anticipate the market shift away from its core SUV business has left it on the skids.
For today, at least, the market warmly received the proclamation today by Fields that his company would, "change or die." Chairman and CEO Bill Ford echoed that comment, saying, "we must reduce capacity in North America."
As workers at Ford and GM are now painfully aware, we all know what that means.
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