The Way Forward

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Ford Motor Company's restructuring plan, made public in 2006, is known as The Way Forward.

Ford is attempting to reduce fixed capital costs while maintaining a special focus on cars and car-based crossover vehicles. Over time, it hopes to make more of its product line profitable instead of relying on a limited portion of the products for profit. Making good profits across the product line requires that the company reduce the costs of development and production, while introducing new products that connect with consumers.

In the latter half of 2005, Chairman Bill Ford asked newly-appointed Ford Americas Division President Mark Fields to develop a plan to return the company to profitability. Fields previewed the Plan, dubbed "The Way Forward", at the December 7, 2005 board meeting of the company; and it was unveiled to the public on January 23, 2006. The plan was revised on September 15, 2006 to accelerate plant closings.

"The Way Forward" includes resizing the company to match current market realities, dropping some unprofitable and inefficient models, consolidating production lines, and shutting down seven vehicle assembly plants and seven parts factories. Among these are St. Louis Assembly (near St. Louis), Atlanta Assembly (near Atlanta), Batavia Transmission (Batavia, Ohio), Windsor Casting (Windsor, Ontario, Canada), and Wixom Assembly (Wixom, Michigan). Up to 30,000 hourly and salaried jobs (28% of the total workforce) in North America over the next six years are expected to be eliminated, which is comparable to similar cutbacks previously announced at General Motors. These cutbacks are consistent with Ford's roughly 25% decline in U.S. automotive market share since the mid-late 1990s.

New cars were developed faster using the new Global Product Development System (GPDS). This brings Ford's cycle time closer to its Japanese rivals.

Ford's realignment also included the sale of its wholly owned subsidiary, Hertz Rent-a-Car to a private equity group for $15 billion in cash and debt acquisition. The sale was completed on December 22, 2005. A joint venture with Mahindra and Mahindra Limited of India ended with the sale of Ford's 15 percent stake in 2005.

Ford has announced a projected return to profitability sometime after 2010 [1]

Plant closings

Ford reportedly plans to close 14 manufacturing plants by 2012 including 7 that assemble cars. Short-term results (by 2008) will reduce Ford's assembly capacity by 26%.

The first closures were announced on January 23, 2006[1]. Ford announced on April 13, 2006 that two more plants would close as well[2]. The plan was accelerated with a mid-September announcement which accelerated the closure of the Norfolk plant and added the Essex engine and Maumee stamping plants to the list[3].

Date announced Plant name Location Date of closing Products Employees
January 23, 2006 St. Louis Assembly Hazelwood, Missouri 2006 Ford Explorer
Lincoln Aviator
Mercury Mountaineer
1,445
Atlanta Assembly Hapeville, Georgia Oct. 2006 Ford Taurus
Mercury Sable
2,028
Batavia Transmission Batavia, Ohio 2008 transmissions 1,745
Windsor Casting Windsor, Ontario, Canada 2008 Engine blocks, parts 684
Wixom Assembly Wixom, Michigan June 2007 Lincoln Town Car
Lincoln LS
Ford GT
1,567
April 13, 2006 Twin Cities Assembly St. Paul, Minnesota, USA 2008 Ford Ranger
Mazda B-Series
1,885
Norfolk Assembly Norfolk, Virginia, USA 2007 Ford F-Series 2,433
September 14, 2006 Essex Engine Windsor, Ontario, Canada 2008 Ford Triton engine
Ford Essex V6 engine
Maumee Stamping Maumee, Ohio 2008 body panels
Total 11,787

Product replacements

The following products are currently assembled at the Wixom (Michigan) Assembly plant, which is closing. They will be replaced by future vehicles. In June 2006, Ford announced that it will not move production to St. Thomas, Ontario, Canada (where its body-on-frame platform-mates Ford Crown Victoria and Mercury Grand Marquis are produced), likely meaning that Town Car production would end permanently. Ford eventually changed its mind, and the company reversed this decision, announcing in September that it would move the Town Car after all.

Date announced Product End of production Replacement
January 23, 2006 Ford GT September 21, 2006 Shelby Cobra GT500
Lincoln LS April 2006 Lincoln MKZ
Lincoln MKS
Lincoln Town Car June 2007 Assembly to be moved

Staff reductions

Up to 30,000 factory jobs would be eliminated with the downsizing envisioned in The Way Forward. The company is also eliminating 4,000 salaried, contract, and agency jobs during the first quarter of 2006, and the company is eliminating 6 or 7 corporate officer positions out of 53 immediately.

Ford is reportedly offering severance packages of up to $100,000 for workers who are willing to give up all future benefits except their pension. The company will also pay up to $15,000 in tuition for workers returning to school. Workers over 55 can reportedly get a $35,000 bonus to retire early, provided they have 30 years of service with the company, and those with 28 years can get leave and 85% pay for two years[4].

Divestment

Ford's plan called for divesting in some businesses in order to raise cash.

  • Jaguar Cars and Land Rover — As of March 26th 2008, Tata Motors reached agreement with Ford to purchase their Jaguar Land Rover operations for two billion dollars. The sale is expected to be completed by the end of the second quarter of 2008.[5]
  • Aston Martin — purchased by a British consortium led by Dave Richards of Prodrive for £479 million.
  • Automobile Protection Corporation — Extended warranty company APCO will also be sold

New products

Ford will also reportedly invest in new products and productions sites to better compete in the marketplace. The company plans to build a new low-cost manufacturing site in North America, possibly in Mexico.

Product plans reportedly call for more crossover SUVs, compact cars, and hybrid vehicles. The company announced the Ford Five Hundred/Mercury Montego and Ford Edge/Lincoln MKX hybrids as part of the plan.

Ford also intends to revive the Lincoln and Mercury brands. Although Lincoln will become the larger seller of the two, Mercury is intended to become an upscale alternative, marketed especially toward women.

References

Notes