DEARBORN, MI — Led by BillJr. in his new role as the stern-but-sensitive choirmaster, Ford Motor Co. executives are singing off the same song sheet.
Their refrain? Product. Product. Product.
Will Wall Street interpret the performance as Handel's Hallelujah Chorus, or Verdi's Requiem? Early reviews are mixed as the auto maker reveals its $4.1 billion plan will:
Eliminate a total of 35,000 jobs globally.
End production of four “low-margin” nameplates.
Close, by mid-decade, three assembly plants, an aluminum casting plant and a connecting rod plant.
The result will be a 16% reduction in North American capacity — from 5.7 million units to 4.8 million.
It goes unsaid that this cut could go deeper because no new products have been scheduled for assembly plants in Avon Lake, OH, and Cuautitlan, Mexico.
“Could things change? Yes,” says President and Chief Operating Officer Nick Scheele. But, he warns: “We would not rule out anything. We are merely declaring what we see, and the fact that the inevitable will happen to those facilities.”
In addition, 11 plants will see shift reductions, and the line speed, at nine will slow. And in its first divestiture salvo,will pursue the sale of corporate aircraft, crankshaftmaker Woodhaven Forging, two auto repair center chains and a chain of automotive recycling centers.
The auto maker also says its powertrain rationalization plan will continue. James Padilla, group vice president-North America, tells Ward's the goal is to reduce to five from seven the number of engine architectures it uses.
Similarly, by 2007, the auto maker wants 64% of its transmissions to come from seven families, as opposed to the 15% forecast for 2003.
Burnham Securities analyst David Healy suggests the auto maker's time frame is as aggressive as it can be.
“I don't think they could do it any faster with the long lead times and new model development and restrictions on plant closings,” Healy says, referring to plant closure moratoriums in the company's contracts with the United Auto Workers and Canadian Auto Workers unions — both of which will make restructuring a bargaining issue.
The UAW enters negotiations next year, while the CAW heads to the table this summer.
Merrill Lynch says the company's strategy is “achievable.”
“There is no question in our mind that management will ultimately succeed in successfully restructuring, or revitalizing, the company,” says a report released by the financial firm's auto analysts. “It is just a matter of what it costs (in terms of poor results, severance payments, potential market share losses, etc.) and how long it takes.”
Bill Ford Jr. did his part to quell any doubts about the auto maker's future. Having replaced hard-nosed Jacques Nasser as president and CEO, “Black Friday” was a debut of sorts for the mannerly Ford family scion.
Before a wary audience of thousands that includes analysts, journalists and employees, the great-grandson of company founder Henry Ford displays a subdued forcefulness that is both calming and inspiring.
Want headlines? He sets his jaw and points to a pair of primary objectives — a pre-tax profit improvement of $9 billion by mid-decade and a $2 billion pre-tax profit improvement this year.
Other goals include:
Raising $1 billion in cash by divesting non-core operations
Reducing non-product costs by $2 billion.
Improving the company's performance on the J.D. Power Initial Quality Survey (IQS).
Then the 44-year-old executive issues this challenge: “Judge us by our results,” he says. “That's how you judge any management team. We feel very confident this is a good plan.”
Which is not to say he feels good about the plan. Looking solemnly into the television camera that beams his image to company facilities throughout the world, he speaks to “the extended members of the Ford family” who face unemployment.
“I can't begin to describe how sorry I am,” he says, adding his compensation will be suspended until the company is restored to health.
Then he hits the plan's high note.
“This is going to be a product-led recovery. And I can't emphasize that enough. Cost-cutting is important — we're doing that. Right-sizing is important — we're doing that. But at the end of the day, the only thing that's going to matter, for us and for our customers is, did we get the product right? Is the quality right? Did we excite them? And did we surprise them? That's our goal as a company. We're going to deliver that.”
That will come to the tune of 20 new models per year across the eight brands under the Ford Motor Co. umbrella. And Richard Parry-Jones will be a featured soloist.
“I've added a couple of strings to my bow,” the company's group vice president-global product development and chief technical officer tells Ward's.
Not the least of which involves Ford's five-brand Premier Automotive Group (PAG), for which he will act as “head coach and strategist.”
“We have a tremendously heavy product development portfolio at work right there. An unprecedented number,” he says.
Having launched '02 Freelander and unveiled '03 Range Rover, Group Vice President-PAG Wolfgang Reitzle says Land Rover's entire line will be all new within four years.
“The (Jaguar) F-Type is in the pipeline, and it will arrive within the next 2½ years,” Reitzle says. “When it arrives, all the Jaguar models will be completely new in four years.”
Jaguar S-Type gets a new interior while the high-end S-Type R and refreshed XJ will debut later this year.
Volvo has added the all-wheel-drive S60 and the rugged XC90. “That's in the space of two years,” Parry-Jones says, addingalso is “on a path of growth.”
The ultra-luxury sports car maker will move down-market before 2005 to introduce an all-new model in the $100,000 range.
“And Lincoln is also going through a major transformation,” Parry-Jones says. “Last year, in August, they got their own 1,500-engineer-strong R&D group.”
When pink slips go out, engineers will be spared, the auto maker says.
“If you go back five years, we had about 15,000 engineers here in North America and about 5,000 engineers in the rest of the world,” Parry-Jones says. “Now, we've got 30,000 engineers worldwide — 15,000 here in North America.
“So the balance of our product development work has shifted dramatically during the last five years. Accordingly, the auto maker forecasts PAG will bring in one-third of the company's earnings by mid-decade. Merrill Lynch notes the theme of Ford's product program “is clearly to richen the company's mix with more upscale models.” In addition, Parry-Jones says, Ford Motor Co. benefits becauseis “much more integrated,” particularly on the engine development front.
Despite this global perspective, Parry-Jones vows adherence to the time-honored American practice of doing it right — the first time.
“It's better to delay a product than it is to launch it if it's not ready. But that's not something you should ever plan on doing. … One of the things that I'm tightening up is the heroic attempts to compress programs.
“I would rather say, ‘OK, we're going to launch this new product and we'll follow the process that we know works, and we'll absolutely deliver on that day.’ Rather than say, ‘Oh, you'd like it six months earlier? We'll have a go.’
“The best thing we can do to help our engineers is to give them a stable situation where they know what the goal is, they know what the time scale is, and they can settle down and work on delivering.”
As of March 1, the blue oval will get additional product-development help from Parry-Jones protégé, Philip Martens. That's when Martens,'s managing director-product planning, design and product development, becomes Ford's vice president-vehicle programs and processes.
What's in the long-term pipeline? Ford teases analysts and journalists with a lightning-quick video montage that flashes photos and sketches on two screens, machine-gun-style. But when the show ends, one shape lingers, having been displayed several times — a crossover/utility vehicle (CUV) resembling a tall wagon (see related story, p.26).
“There's no big secret,” says Chris Theodore, vice president-North America product. “Clearly, everybody's searching for a crossover vehicle. And we think there's a pretty clear opportunity there. Nobody's hit it right yet.”
Theodore envisions CUVs as a “Boomer kind of product.” Boomer buyers are needs-focused, he says.
“Yet they're going to want some more upscale imagery. They also want and appreciate the dynamics and quietness and luxury that are offered by cars.”
Theodore and other Ford executives decline further comment, but Ward's has learned the auto maker will enter the market within three years. The product is code-named D219.
Two other demographic groups have the attention of the storied company — “aging” Boomers and “Millennials.” The latter, Theodore says, will dominate the buying public by 2010.
Ford has begun researching their tastes “and we think we're just starting to get some insights,” he says.
The auto maker has tried employing members of the age group in its product-development teams. But success has been mixed.
“The interesting thing is, when you go out and test them, (the product) doesn't really hit with them.”
Closing After the UAW Contract Expires in 2003
Hazelwood Assembly, in St. Louis, which builds Ford Explorer and Mercury Mountaineer.
Edison Assembly in Edison, N.J., which builds Ford Ranger.
Cleveland Aluminum Casting plant, Cleveland, OH, which makes aluminum engine blocks, after the UAW contract expires.
Vulcan Forge in Dearborn, which makes connecting rods, after the UAW contract expires.
Closing After the CAW Contract Expires in 2002
Ontario Truck, in Oakville, Ont., which builds F-Series.