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Thread: Ford proposal follows GM/Delphi and Merck

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    Banned Melonie's Avatar
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    Default Ford proposal follows GM/Delphi and Merck

    " Ford's fix-it plan

    Up to 30,000 workers to be eliminated and at least 10 factories to close
    Bryce G. Hoffman / The Detroit News

    DEARBORN-- Ford Motor Co. executives will present a restructuring plan to the company's board of directors today that calls for closing at least 10 assembly and component plants and eliminating 25,000 to 30,000 hourly jobs in North America within five years, according to people familiar with the plan.

    The cuts would be deeper than many had expected, signaling the urgency of Chairman and CEO Bill Ford Jr.'s push to restore the automaker's ailing North American operations.

    Bill Ford has promised the impending moves, expected to be announced Jan. 23, will affect all levels of the company. As such, the automaker will announce the departure of as many as seven top executives in the coming weeks, according to the people familiar with the plan.

    The broad outlines of Ford's plan -- dubbed the "way forward" -- were approved by directors at an off-site meeting in October with top executives in South Carolina.

    In meetings today and Thursday, Mark Fields, Ford's new president of the Americas division and the architect of the "way forward" plan, will walk board members through the fine points, including budget projections for 2006 and 2007, capital expenditure requests and other details, sources said.

    Fields also will present his blueprint for revitalizing the Ford, Mercury and Lincoln brands, which includes a new strategy to attract young buyers for the Blue Oval brand.

    "That scale of action by Ford would be perceived as a very aggressive right-sizing move and would go a long way toward Ford getting its cost structure back in line with its much-diminished market share," said Glenn Reynolds, an analyst with Credit Sights, a New York-based research firm.

    Ford would not publicly comment on its plans. "Our work continues," said spokesman Oscar Suris. "These plans will be final when they're ready to be shared publicly."

    Ford's upcoming turnaround plan appears to be more far-reaching than the one Bill Ford launched after he became CEO four years ago. That plan called for 20,000 job cuts in North America, several plant closures and the elimination of vehicles like the Mercury Cougar.

    At the time, Bill Ford set a goal of making $7 billion in annual pretax profit by the middle of this decade. Ford has since abandoned that goal. The company is likely to earn about $2.5 billion this year after taxes, but has struggled with falling sales and deep losses in North America.

    The new plan, which will guide the company through 2011, calls for 25,000 to 30,000 blue collar jobs to be eliminated in North America. Ford had 87,000 UAW-represented workers in North America at the end of 2004. It has about 11,600 union workers in Canada.

    The cutbacks in the works at Ford appear to be similar in scope to those outlined last month by General Motors, which said it will cut 30,000 jobs and close nine plants.

    Ford will make the case that its hourly work force won't be alone in accepting sacrifices. The automaker already has announced plans to cut about 4,000 salaried jobs in the first quarter of 2006 on top of 2,750 white-collar cuts made this year.

    United Auto Workers President Ron Gettelfinger has made it clear that his members won't abide suffering cutbacks alone. Nevertheless, Ford's plan to close at least 10 assembly and component plants over the next five years in the United States, Canada and Mexico will be a bitter pill for the union.

    Sources familiar with Ford's strategy said the decision about which plants to close has not been finalized, adding that Ford may only announce a few specific plant closures in January.

    Those are likely to include Ford's assembly plants in St. Paul, Minn., and St. Louis, Mo. The St. Louis plant's prospects have been hurt by a dramatic decline in demand for Ford's once best-selling Ford Explorer SUV, which is also built in Louisville, Ky. The St. Paul factory produces the Ford Ranger pickup, which has not been redesigned in several years.

    The fate of Ford's underused Wixom plant, the subject of much speculation in recent months, is still up in the air, as is that of Ford's Atlanta assembly facility.

    Ford is likely to hold off on naming all the plants slated for closure. The company is already negotiating with state and local authorities around the country, and the outcome of those talks could go a long way toward determining which plants stay open and which ones close. However, Ford also wants to keep its options open in order to adjust to changing market conditions.

    While Ford may not specify all of the plants it intends to close, it will estimate the amount of production capacity it plans to eliminate. Its goal is to boost capacity utilization to at least 95 percent. Global Insight Inc. estimates that Ford's North American factories are currently running at 72 percent capacity. Anything less than 90 percent is considered to be operating at a loss.

    Ford cannot afford for its North American factories to operate inefficiently. Over the past year, Ford's pretax profits in North America have fallen from almost $1.8 billion in the first nine months of 2004 to a loss of nearly $2.2 billion for the same period in 2005. Ford, Lincoln and Mercury's share of the domestic market has dropped to 17.4 percent, compared to 25.6 percent in 1995.

    'A super plan'

    On Tuesday, Ford board member Kimberly Casiano told Dow Jones News Service that she and her colleagues will pore over the details of the proposal this week. "The plan is a super plan," Casiano said after speaking at a luncheon in Detroit.

    She cautioned that the board may not approve every aspect of the "way forward" plan. "You can't always make every detail of a plan possible."

    UAW Vice President Gerald Bantom said Tuesday that the details of Ford's restructuring plan will be released Jan. 23, but said he did not know the extent of Ford's planned cuts. "We're hoping that nothing happens," said Bantom, who heads the UAW's Ford bargaining unit. "But we know that's not going to happen."

    Ford is already in negotiations with the UAW and hopes to receive concessions on health care costs similar to those the union recently negotiated with GM. Ford hopes a deal can be ratified by union members by the end of the year.

    In a recent interview with the Detroit News, the UAW's Gettelfinger said he has had several meetings with Fields since he took over as head of Ford's Americas division in October and feels comfortable working with him.

    Speaking at a press conference Tuesday, Gettelfinger said the UAW has hired an outside firm to review Ford's finances. "We're still in the process of analyzing the data," the union leader said.

    Ford's restructuring announcement will come on the heels of a series of new product and brand revelations at both the Los Angeles and Detroit auto shows. The timing is designed to demonstrate that Ford's "way forward" plan is about not only closing plants and cutting jobs, but also expanding the company into new markets.

    Fields' biggest challenge will be to stop Ford's 10-year market share slide.

    Fields to detail plan Jan. 4

    On Jan. 4, Fields is likely to outline Ford's new brand strategy in his keynote address at the Greater Los Angeles Auto Show. While the details are still being worked out, Fields is expected to outline a comprehensive strategy to attract young buyers to the Ford brand.

    "Ford definitely needs a youth strategy," said Jim Sanfilippo, an analyst with AMCI Inc. in Detroit. "Ford can't continue to operate without more volume at the low end of the market."

    While Ford once had a solid hold on the bottom of the market with vehicles like the Fiesta and Escort, that grip has been broken in recent years as competitors have rolled out more targeted products. Toyota Motor Corp. has led the charge with its new Scion brand.

    Jim Hall, an analyst with AutoPacific in Southfield, said Ford has several interesting international designs that could appeal to younger buyers in its home market, but most do not meet U.S. safety standards.

    "There's nothing that's an easy pull off the shelf," Hall said. "Expediency will be difficult."

    Ford may unveil a youth-oriented concept car at the Detroit auto show, but that will take some time to develop into a production vehicle.

    "There are some products that would fit with a youth strategy that Ford has in its pipeline," said Michael Robinet, an analyst with CSM Worldwide in Farmington Hills. In the meantime, Ford will likely use new marketing strategies and trim lines to draw younger buyers to its existing products.

    As The Detroit News reported last month, Fields took a hard look at killing the Mercury brand. However, that study concluded that Mercury brings in more money than would be saved by eliminating it. Instead, the company will try to reenergize Mercury by giving the brand new product designed to appeal to women and more youthful buyers.

    Fields would also like to expand Mazda's presence in North America by encouraging more Lincoln Mercury dealerships to add Mazda franchises.

    Some dealers, like Jerry Reynolds in Dallas, already have side-by-side Lincoln Mercury and Mazda dealerships. "It really is a good mix," Reynolds said, though he stressed he has heard nothing about Fields' plan. "You get the younger buyers with Mazda, the older with the Lincoln and hopefully some in the middle with Mercury."

    Sanfilippo said Mazda has struggled to expand its sales channel in North America. "Lincoln Mercury might be a way to get that going faster," he said."First you've got to fix Mercury and Lincoln."

  2. #2
    God/dess montythegeek's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    While 30k jobs sounds like a lot, 231,000 jobs were created in November. times 12 that would be 2.8 million jobs per year, so 30k jobs is 1% of other job creation divided by 5 years for the Ford cuts to happen or 0.2% per year.

    Nonfarm productivity grew 3.1% in the past year and cuts like this are part of it. Productivity makes stuff cost less and allows the US to have such a high standard of living.

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    Veteran Member susie's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    What about the new plant opening in that area? I thought that they were going to be getting rid of jobs, but also opening a new plant, and transfering.
    I'm probably way off, but I remember the prices of housing near dearborn going through the roof because they were going to build a plant.
    Susie

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    Default Re: Ford proposal follows GM/Delphi and Merck

    Quote Originally Posted by montythegeek
    While 30k jobs sounds like a lot, 231,000 jobs were created in November. times 12 that would be 2.8 million jobs per year, so 30k jobs is 1% of other job creation divided by 5 years for the Ford cuts to happen or 0.2% per year.
    Monty, I fear the 30K jobs to be eliminated are $40,000 to 60,000 per year jobs while the 231,000 newly created might be largely low paying service sector jobs. Doesnt sound like a good trade off to me.

    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

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    God/dess montythegeek's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    FBR,
    Third-quarter to third-quarter employment (nonfarm) went up 1.7% in the past year. Real GDP went up 3.7%. How can you explain that if all the jobs, or even the average job was below the average of a year ago. This ain't Lake Wobegon.

    A simple test of logic is to reverse the proposition and see if that makes sense. If Ford workers are not overfed and over paid workers and GDP goes down by getting rid of them, then all we need to do is pay all the janitors in the world $1 million a year and the economy will be supurb. Of course not, the people footing the bill for the janitors cannot afford to do other things that pay peopleless than a $1million a year but are worth the money.

    Not wanting to get rid of the inefficient is like running a marathon with a rock in your shoe because you do not want to take the 45 seconds it takes to remove the rock. Without the rock you can run better and faster and more than make up for the time spent removing it..

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    God/dess Deogol's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    ^^^ That is a false argument and you know it.

    FBR is right - there are plenty of low wage jobs being created to replace high wage jobs.

    The GDP is from people ransoming their house values and other credit mechanisms - they are pulling money out of the past to spend in the now.

    This is going to catch up to us.

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    Banned Melonie's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    Ultimately comparing union manufacturing jobs to 'replacement' jobs in primarily the construction and service industries boils down to a comparison of the 'disposable' income of potential club customers. A union employee is typically going to be bringing home a $1000+ per week paycheck. On the other hand, the majority of construction and service industry employees are going be bringing home perhaps half that much on the average.

    If you assume that both have to buy food, pay utility bills, pay rent, make car payments etc., even if the lower paid workers' 'tastes' are less expensive than the union worker it still means that the union worker is VASTLY more able to afford spending say $200 a week in a club than the service worker and still meet his other financial obligations. On the other hand, the service worker is vastly more likely to expect maximum 'bang' for his buck while spending perhaps $50 a week in a club. This reduction in 'discretionary income' has a direct correlation to reduced dancer earnings potential.

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    God/dess Deogol's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    Quote Originally Posted by Melonie
    Ultimately comparing union manufacturing jobs to 'replacement' jobs in primarily the construction and service industries boils down to a comparison of the 'disposable' income of potential club customers. A union employee is typically going to be bringing home a $1000+ per week paycheck. On the other hand, the majority of construction and service industry employees are going be bringing home perhaps half that much on the average.
    Half as much because they are sending half of it back to central and south america! Roof houses in America for ten years - retire like a King in Beliza.

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    Default Re: Ford proposal follows GM/Delphi and Merck

    Quote Originally Posted by Melonie
    Ultimately comparing union manufacturing jobs to 'replacement' jobs in primarily the construction and service industries boils down to a comparison of the 'disposable' income of potential club customers. A union employee is typically going to be bringing home a $1000+ per week paycheck. On the other hand, the majority of construction and service industry employees are going be bringing home perhaps half that much on the average.

    If you assume that both have to buy food, pay utility bills, pay rent, make car payments etc., even if the lower paid workers' 'tastes' are less expensive than the union worker it still means that the union worker is VASTLY more able to afford spending say $200 a week in a club than the service worker and still meet his other financial obligations. On the other hand, the service worker is vastly more likely to expect maximum 'bang' for his buck while spending perhaps $50 a week in a club. This reduction in 'discretionary income' has a direct correlation to reduced dancer earnings potential.
    I agree Melonie (and Deogol). When Im at the club I actually have conversations with my fav and some of the other strippers about trends in their industry. I keep hearing more and more how the customer base has changed over the last few years. It seems that the customers are falling into the extremes of the spectrum. There are still high rollers (although not quite as many) who seem to be largely business owners and highly paid professionals such as doctors, lawyers etc. Unfortunately from a dancers perspective, these guys are typically tighter with their money and are demanding much higher mileage for the dollars they are spending. At the other extreme are the low end customers who have to save for a month to be able to afford one trip to the club. They guard their $1's and if they do spring for a dance, it takes an inordinate amount of effort for the dancer to part them from their money. What is increasingly missing is the middle of the road customer who can come in a couple of days a month and drop $400-500 on dances, drinks and tips. I think this indicates (at least in my home town) the spending (and by inferrence income) polarization that is going on due to the loss of highly paid manufacturing jobs.

    My fav appreciates my monetary attention (no complaints on my end either...she returns it to me in spades) but she does get frustrated trying make what was pretty easy money 5 years ago.

    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

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    Veteran Member girlnew156's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    I remember back when I worked Chicago, business would begin to dry up there, and
    then everybody would look towards Detroit.
    And then here we go, everybody would be heading towards Detroit.
    And then there would be too much dancers there, and the market would saturate.

    And then everybody would head back to Chicago. Back and forth, back and forth.
    It was cyclical. ups and downs. ups and downs, yeah, there would be too many strippers
    chasing down too few customers.

    One way to look at it would be a classical predator prey modeling of population
    dynamics. Sort of like two species living on this island and one species preys
    on the other.

    If the prey population has enough to eat, it will grow and prosper, and then
    the predator population would grow also because it is feeding off the prey population.

    But the prey populatiaon is getting killed off, so the predator has fewer and fewer
    prey to feed off. Eventually, some of the predator population will begin dying off
    due to starvation.
    Now, since there is fewer predators, the prey population gets a breather, and begins
    to re-populate, and they cycle repeats.

    But now, in this case, there is a mass extinction of the prey population, oh yeah,
    and what do you think is going to happen to the predator population (us)?

    Oh, yeah, some of us will have to leave and get other jobs.
    It is uncanny, but that is what I have noticed in my work experience.

    Well, some clubs and bars will be heading towards extinction.
    It may take a while, but the time will come.

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    God/dess FBR's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    Girl, I agree with what you are saying. There has always been a natural supply and demand thing going on. But from what Im seeing, in many parts of the US, circumstances have changed. A guy making $20 an hour can afford a club trip several times a month. A guy making $10 per hour (because his $20/hr job was outsourced) cant do it. Hes lucky if he can go a few times a year. And if he has significant home financial obligations his clubbing days are probably over and done with.

    Strippers fall into the service sector but not the necessary kind like going to the doctor etc. As we continue to export high paying jobs (to the glee of some people which blows my mind) dancers will likely find it more and more difficult to maintain their income without doing things outside of their previously ironclad personal boundaries.

    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

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    God/dess montythegeek's Avatar
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    Default Re: Ford proposal follows GM/Delphi and Merck

    [QUOTE=Deogolsnip
    The GDP is from people ransoming their house values and other credit mechanisms - they are pulling money out of the past to spend in the now.

    snip[/QUOTE]
    Talk about false arguments. GDP is not sales, GDP is PRODUCTION. It is only calculated as consumption+investment+government+exports-imports because it is easier to do it that way on a short-term basis with the numbers available on a short-term basis. If it was added up based on direct measurement it would take 4 years to calculate third quarter GDP.

    Of course, half of the jobs in November were in industries like education and medical care, construction, and leisure and hospitality, but those industries are half the jobs to start off with and not all of them are below average. Every McDonalds has a manager, and assistant manager and Mickey D and BK are less than a quarter (way less) of food service jobs. For every McDonalds there are 5-10 other restaurants. Education and medical are not all bedpan dumpers. they are x ray tech, doctors, hospital administrator pulling down $90-100K a year as well.

    The biggest piece of construction employment gains were in heavy construction, not homes. 61% of 278 industries added jobs in November. 61% cannot be below average.

    And the biggest piece of manufacturing jobs lost in the last four years wer in industries like apparrel which pay $6.00 per hour, not $30/hour. Norma Rae's job went to China--Norma Rae can now go to work at McDonalds and make more money.

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