Reining It In: Ford Cuts Production and Benefits
After posting a total loss of $7.24 billion in the first three quarters of this year, Ford is continuing to take steps to cut costs and cut production to enable better maneuverability in the marketplace.
The company is significantly reducing production for 2007. Truck sales are still sluggish, although the debut of the new Navigator and Expedition boosted sales for each vehicle almost 50%. Their midsize sedan offerings, including the Fusion, Milan, and MKZ, are up significantly: 22% overall. With the modern political climate, the conspicuous consumption SUVs don’t hold the same cachet they used to. Dealers have engaged in massive vehicle clearances, and lots are holding more than 100,000 fewer vehicles than last year.
Ford has already cut production by 16% this year, and will further reduce it by up to 12% next year. This ‘urban-renewal’ strategy will help the company’s financial situation by reducing the number of vehicles languishing on lots, closing plants, and making it easier to shift production to the most profitable vehicles if necessary. The downside, of course, is that the employees will feel the pinch even more. Ford announced that there will be no raises for salaried workers next year, and that salaried retirees over 65 who are eligible for Medicare will no longer receive health insurance – instead, they will get an $1800 supplement to purchase their own insurance. The company is, however, reinstating the 401(k) matching plan – 60 cents on every dollar up to 5% of an employee’s salary.