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Ford Motor Company - Press Release
- FORD FIGHTS BACK
- Bill Ford: gFord Motor Company was solidly profitable in 2005
and growing around the world. The next chapter in our history will
be remembered for a renewed commitment to innovation and as the
time we moved boldly to prepare Fordfs North American business for
global competition.h
- Comprehensive North American gWay Forwardh plan focuses every
part of the business on the customer - to build stronger Ford,
Lincoln and Mercury brands, a strengthened product lineup and far
greater quality, competitive costs and improved productivity.
- Product investments will result in new vehicles in new
segments to reach more customers - including small cars and more
crossovers - while maintaining Fordfs truck leadership.
- Ford is committed to stabilizing its U.S. market share in the
near term.
- Competitive cost structure includes net material cost
reductions of at least $6 billion by 2010.
- Productivity improvements leverage the companyfs global
product development scale and lean and flexible manufacturing
system to introduce more products faster.
- Straightforward vehicle pricing will continue to be introduced
with new models.
- North American capacity is realigned to match demand - with 14
manufacturing facilities to be idled - resulting in significant
cost savings and reduced employment of 25,000-30,000.
- Salary-related costs are being cut 10 percent in North America
with the previously announced reduction of the equivalent of 4,000
salaried positions by the end of the first quarter. In addition,
the companyfs officer ranks are being reduced 12 percent by the
end of the first quarter.
- Ford is planning a new low-cost manufacturing site for the
future.
- North American automotive profitability is achieved no later
than 2008.
- Beginning in 2006, Ford Motor Company will no longer provide
earnings guidance - to keep the company and investors focused on
one goal: sustainable profitability over time in all regions.
DEARBORN, Mich., Jan. 23, 2006 - Ford Motor Company [NYSE: F]
today announced details of a comprehensive plan to restore
profitability to its automotive business in North America no later
than 2008. Ford will apply lessons learned from consumers and the
companyfs successes around the world to strengthen its Ford, Lincoln
and Mercury brands and deliver more innovative products while
simultaneously reducing costs and improving quality and
productivity.
gThe automotive market in North America is rapidly becoming as
crowded and fragmented as other global markets,h said Bill Ford,
chairman and CEO. gTo meet this challenge, we are acting with speed
to strengthen the Ford, Lincoln and Mercury brands, deliver the
innovation customers demand and create a business structure for us
to compete - and win - in this era of global competition.
gWe will be making painful sacrifices to protect Fordfs heritage
and secure our future,h he added. gGoing forward, we will be able to
deliver more innovative products, better returns for our
shareholders and stability in the communities where we operate.h
Ford Around the World - 2006
Outlook
For 2006, the company is expecting another year of profitability
from automotive operations outside of North America . Pre-tax
profits, excluding special items, are expected from automotive
operations in South America , Europe (Ford of Europe and Premier
Automotive Group), Asia-Pacific and Africa , and from Mazda and
Associated Operations. North American automotive operations are
expected to be unprofitable. Overall, Fordfs global automotive
operations are expected to have pre-tax losses in 2006, while Ford
Motor Credit is expected to achieve pre-tax profits.
The underlying assumptions behind this outlook include: full-year
industry volumes of 17 million units in the U.S. and 17.3 million
units in Europe ; industry net pricing that is expected to be down
slightly in the U.S. and Europe . Also, the companyfs quality
performance is expected to improve, market share is expected to
stabilize or improve in all regions, and cost performance is
expected to be favorable. Capital expenditures of approximately $7
billion are expected during 2006, while the company expects its
year-end cash balance to be more than $20 billion.
Beyond the above expectations, the company is providing no other
guidance about its financial performance for 2006 - to keep
employees and investors focused on one goal: sustainable
profitability over time in all regions.
gWe must be guided by our long-term goals of building our brands,
satisfying customers, developing strong products, accelerating
innovation, and, most importantly, producing a sustainable profit
from our automotive business,h said Bill Ford.
Ford in North America -
the Way Forward
Fordfs automotive business in North America was profitable in
2003 and 2004, thanks to the product investments and cost reductions
driven by the companyfs Revitalization Plan, announced in 2002.
Since that time, more and stronger competition in all segments, a
faster-than-expected customer shift from traditional SUVs into other
segments, significantly higher material and energy costs and other
factors have resulted in lower market share and higher costs for the
company.
gThe team in North America , led by Mark Fields and supported by
Anne Stevens, developed the plan for North America , drawing on
their extensive global experience in Asia , Europe and The Americas.
They have reenergized the Ford team to make it work, and they have
the full support of the Ford Motor Company behind them,h said Jim
Padilla, president and chief operating officer.
Fields, executive vice president and president, The Americas,
calls the plan the gWay Forward.h It touches every piece of the
North American business to make it more customer-focused,
product-driven and efficient, including:
- More clarity for the Ford, Lincoln and Mercury brands ? with a
sharper focus on the customer and a clear point of view that will
appeal to more buyers than today.
- A renewed commitment to design, safety and technology
innovation to differentiate Ford Motor Company and its products in
the marketplace.
- New product investments - utilizing Fordfs global
architectures and scale - to deliver more new products faster,
including more crossovers, hybrid vehicles, new small cars,
increased spending on Fordfs truck leadership and new gwhite
spaceh products.
- Material cost reductions of at least $6 billion by 2010.
- Continued straightforward pricing that is clear, credible and
simple, which will further improve residual values.
- A lean and flexible manufacturing system combined with
capacity matched to demand. Capacity will be reduced by 1.2
million units or 26 percent by 2008, representing the
majority of actions within the planfs 2006-2012 period.
- Plant-related employment is reduced by 25,000-30,000 people in
the 2006-2012 time period, in addition to salaried personnel
reductions and a reduction in the companyfs officer ranks.
Stronger Ford, Lincoln
and Mercury Brands
Ford kicked off the Way Forward plan in October with a
comprehensive analysis of consumer attitudes and values in the U.S.
automotive market. The goal was to develop a laser-like focus on
different customer targets for Ford, Lincoln and Mercury to guide
each brandfs design, engineering and marketing decisions.
gOne of the most important findings from this research is that
Americans really do want to buy American brands, as long as they are
competitive with the imports,h said Fields. gWe know this, because
itfs already working in some segments today, such as the success of
the new Ford Fusion in the import-dominated midsize car market.
gOf all the leading automakers, we believe Ford is America fs Car
Company because of where wefve been. In terms of economic and social
influence, there is no other company thatfs had a greater impact on
the lives of people in the U.S. and in the 20th century than Ford.h
Customers identify with Ford and its uniquely American story, the
research also revealed.
gThe challenge going forward is to give our customers, employees,
retirees, dealers, suppliers and investors a reason to believe in
Ford. That is going to be our focus,h Fields said. gOur Way Forward
is not a retreat into smaller markets, but a retaking of the
American marketplace. Itfs time to play offense. Itfs time to fight
back.
gWe will compete vigorously to be America fs Car Company, winning
the hearts and minds of even more customers,h he added. gWe will
maintain our commitment to our loyal truck customers, while
delivering innovative and boldly styled cars, crossovers, SUVs and
other all-new products that will appeal to people who are still
inspired by the American dream.h
With that clear point of view in the marketplace, Ford is
investing in new products for Ford, Lincoln and Mercury.
The investment includes moving forward with the companyfs plan to
offer hybrid technology on half of the companyfs Ford, Mercury and
Lincoln nameplates in the U.S.
Today, the company is announcing that hybrid versions of the Ford
Five Hundred, Mercury Montego, Ford Edge and Lincoln MKX will debut
in the 2008-2010 timeframe. The new hybrids will join the Ford
Escape and Mercury Mariner hybrids, which are on sale today, as well
as the Ford Fusion and Mercury Milan hybrids, which will debut in
2008. Overall, Ford Motor Company plans to build 250,000 hybrids a
year by 2010.
Ford also is announcing that it will introduce new gwhite spaceh
products to reach customers in new segments, and accelerate plans to
bring even more crossover vehicles and new small cars to market. At
the same time, the company announced that it is increasing its
product investment in Ford F-Series truck leadership; increasing
momentum on its blockbuster cars today, such as the Ford Fusion and
Ford Mustang; introducing more design innovations - for more gat a
glanceh sheet metal changes - and introducing more safety
innovations throughout its North American lineup.
gWith more focused brands, new product investment and innovation,
Ford will slow the rate of loss and then stabilize our U.S. market
share in the near term, even as competitors add new models,h Fields
said. gFrom there, we can set our sights on the future.h
The Ford Brand: In the past, the Ford brand has
demonstrated a clear customer focus in many - but not all -
segments. Going forward, the Ford brand will build upon the success
of hits, such as the Ford F-Series, Explorer, Expedition, Mustang,
Escape and Fusion, and enter new segments with a clear, consistent
and distinct point of view - one driven by bold, American design and
innovation. The 2007 Ford Edge, which goes on sale later this year,
embodies that spirit.
gWe know how to play offense and play to win,h Fields said. gOur
plan will deliver more products - from small cars to our largest
trucks - that are unmistakably Fords.h
Ford remains committed to maintaining leadership in full-size
pickup trucks with the F-Series. The company also plans to continue
its momentum in midsize cars - with all-wheel-drive and hybrid
derivatives coming for the Ford Fusion - and developing new small
cars and even more crossovers for the Ford brand.
Mercury : Ford is recommitting itself to Mercury
and has developed more focused positioning that is a refinement of
the work already done to revitalize the brand.
The newest Mercury products - the Milan , the Mariner and the
Mariner Hybrid - are attracting younger customers to the brand and
more women than Ford-brand products in the same segments, Fields
said. In addition, they are bringing new customers to Ford Motor
Company - at conquest rates as high as 50 percent.
gT he attraction of Mercury is modern, expressive design ? one
that is differentiated from Ford vehicles. Our Mercury target
customer is not looking for product functionality that is
substantially different from Ford vehicles. But they do have
different attitudes and values, and they want a product that
visually communicates that distinctiveness.
gGoing forward, we will be more aggressive in appealing to these
customers with clear, modern differentiation in the design of
Mercurys, a unique purchase experience and marketing that is
targeted, personalized and interactive ,h Fields said.
Lincoln : Fordfs vision for the Lincoln brand is
to make Lincoln the reward for consumers who are living the American
dream. The company sees Lincoln becoming the largest volume
contributor to the Lincoln Mercury business.
g Lincoln customers donft need to shout about success. They are
self-made people with enough confidence to be elegant and
understated,h Fields said. gThat understanding of the Lincoln
customers will drive our brand and product decisions going forward.
h
The 2006 Lincoln Zephyr, the brandfs first entry-luxury car, and
the 2007 Lincoln MKX, the brandfs first crossover, are significant
first steps. Going forward, the company plans to give Lincoln
vehicles an even clearer point of view through their powertrains,
unique comfort and convenience features and unique designs.
g Lincoln is about American luxury. There are many customers in
this country living the American dream and who would prefer to drive
America fs luxury car. That is where we are headed ,h he added.
Straightforward Pricing: Ford is accelerating
the clear-and-simple pricing strategy that began with the
introduction of the Ford Fusion and Ford Mustang. Ford plans to
reduce the MSRP of its products and dramatically reduce and cap
rebates as it introduces new products.
g We started introducing clear pricing two years ago. The success
of Mustang and Fusion proves that it works,h Fields said. g We will
bring sticker prices more in line with actual transaction prices and
cap ecash on the hoodf rebates as we introduce new cars and trucks
into the marketplace. It will protect our margins and consumers,
too, through higher resale values.h
Ford also will increase its product advertising, focusing on
brand characteristics based on innovative designs, features
and customer benefits.
Investment-Efficient Product Creation
Ford has committed to return its North American automotive
business to profitability no later than 2008. Over time, the Way
Forward plan should deliver profitability throughout the lineup -
including new small cars - by achieving significant material cost
savings as well as quality and productivity improvements.
Several new initiatives will bolster ongoing work that already is
yielding significant operating improvements. Specifically:
- Ford will use more global vehicle architectures in North
America , particularly for cars and crossovers, to reduce
investment spending and improve quality.
- The company will share more parts and systems that are
invisible to the customer, such as brakes, suspension and
underbody components, across its North American, European and
Asian brands to leverage its global purchasing power for lower
costs and better quality.
- Ford will continue to implement its Global Product Development
System - which is based, in part, on Mazdafs highly successful and
efficient model - to reduce product development times by six to 12
months, depending on the size of the program.
- Ford will continue to invest in lean and flexible
manufacturing, with 75 percent of its North American assembly
capacity being gflexibleh by the end of 2008.
Improved quality will be achieved, in part, through the gAligned
Business Frameworkh agreements with select strategic suppliers. The
agreements are designed to strengthen collaboration and create a
more sustainable business model for both Ford and its key suppliers
to improve mutual profitability.
The Aligned Business Framework - coupled with Fordfs gCommodity
Business Planh process and a new single-team approach to product
development and purchasing - will deliver improved quality and drive
technology innovations to Ford, while lowering costs.
gWe are committed to developing strong relationships with a
select group of more capable, more financially stable strategic
suppliers on a long-term basis,h said Anne Stevens, executive vice
president and chief operating office, The Americas. gStrong
suppliers and proven processes that everyone sticks to religiously
go hand in hand with delivering innovation, quality and lower
costs.h
Smaller, Nimbler Organization
Achieving a lean fixed-cost structure and significantly improving
Fordfs North American assembly capacity utilization are critical
components of the Way Forward plan.
gWefre now well past the point in which one or two hit products
can correct the overcapacity we have or justify the staffing levels
we maintain - even with the significant actions wefve taken during
the past couple of years,h Stevens said. gSadly, this isnft just a
Ford issue. Itfs an issue for our domestic competitors, as well.
gAs hard and painful as it is to idle plants and reduce our work
force, we know these sacrifices are critical to set the stage for a
stronger future,h she added.
Ford is taking the following new actions to align its capacity
with expected demand and to reduce fixed costs:
- 14 manufacturing facilities will be idled and cease production
by 2012, including a total of seven vehicle assembly plants.
- Assembly capacity will be reduced by 1.2 million units or 26
percent by the end of 2008.
- A new low-cost manufacturing site is planned for the future.
Ford will idle the following facilities through 2008:
- St. Louis Assembly
- Atlanta Assembly
- Wixom Assembly
- Batavia Transmission
- Windsor Casting (announced following CAW contract negotiations
in 2005)
- Two additional assembly plants, which will be determined later
this year
In addition, production at St. Thomas Assembly will be reduced to
one shift. Facilities operated by Automotive Components Holding LLC
are not included in the new announcement.
All of these actions will reduce total North American employment
by 25,000-30,000 people in the 2006-2012 time period. This is in
addition to the previously announced reduction of the equivalent of
4,000 salaried positions in the first quarter of 2006 - or 10
percent of salary-related costs - and a reduction in t he companyfs
officer ranks by 12 percent by the end of the first quarter.
Ford has briefed the leadership of the UAW and CAW about these
plans.
Financial Impact
2006 will be a year of transition as Ford moves from its old
North American business model to a new customer-focused strategy
that is designed to restore automotive operations in the region to
profitability no later than 2008. The estimated pre-tax financial
impact of the North American plan in 2006 includes:
- $250 million for hourly personnel separations - excluding ACH
actions.
- $220 million for fixed asset write-offs.
gOur cost structure will improve as we progress through 2006 and
increasingly thereafter, and wefll return to profitability in our
North American automotive business no later than 2008,h said Don
Leclair, executive vice president and chief financial officer.
gWefre confident in our plan and optimistic we can achieve our
goals.h
Ford begins a new era in its North American automotive business
with a realistic view of the challenges facing the company but also
building on several important competitive strengths, including:
- A corporate commitment to design, safety and technology
innovation.
- Leadership in the full-size pickup trucks, where the Ford
F-Series has been No. 1 for 29 years.
- A resurgent car business, paced by the Ford Mustang and
Fusion, the Mercury Milan and the Lincoln Zephyr.
- A strong and growing presence in crossover utility vehicles,
todayfs fastest-growing segment.
- Ford Credit, which continues to be closely linked to Fordfs
automotive business, delivering solid profitability.
- More than 4,300 Ford and Lincoln Mercury dealerships.
gFordfs strengths were built over 100 years, and we are taking
the tough but necessary steps to address our issues with candor,
speed and compassion for the people affected by our work force
reductions,h said Bill Ford. gThis next chapter in Fordfs history
will be remembered for our renewed commitment to innovation and as
the time we moved boldly to prepare Fordfs North American business
to face global competition.h
###
Jan. 23, 2006
Safe Harbor/Risk
Factors
Statements included or incorporated by reference herein may
constitute gforward-looking statementsh within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based on expectations, forecasts and assumptions by
our management and involve a number of risks, uncertainties, and
other factors that could cause actual results to differ materially
from those stated, including, without limitation:
- Greater price competition resulting from industry
overcapacity, currency fluctuations or other factors;
- A significant decline in industry sales, particularly in the
United States or Europe, resulting from slowing economic growth,
geo-political events or other factors;
- Lower-than-anticipated market acceptance of new or existing
products;
- A market shift (or an increase in or acceleration of market
shift) away from sales of trucks or sport utility vehicles, or
from sales of other more profitable vehicles in the United States;
- Higher prices for or reduced availability of fuel;
- Currency or commodity price fluctuations;
- Economic distress of suppliers that may require us to provide
financial support or take other measures to ensure supplies of
materials;
- Work stoppages at Ford or supplier facilities or other
interruptions of supplies;
- Labor or other constraints on our ability to restructure our
business;
- The discovery of defects in vehicles resulting in delays in
new model launches, recall campaigns or increased warranty costs;
- Increased safety, emissions, fuel economy or other regulation
resulting in higher costs and/or sales restrictions;
- Unusual or significant litigation or governmental
investigations arising out of alleged defects in our products or
otherwise;
- A change in our requirements for parts or materials where we
have entered into long-term supply arrangements that commit us to
purchase minimum or fixed quantities of certain parts or
materials, or to pay a minimum amount to the seller (gtake-or-pay
contractsh);
- Worse-than-assumed economic and demographic experience for our
postretirement benefit plans (e.g., investment returns, interest
rates, health care cost trends, benefit improvements);
- Changes in interest rates;
- Additional credit rating downgrades;
- Inability to access debt or securitization markets around the
world at competitive rates or in sufficient amounts;
- Higher-than-expected credit losses;
- Lower-than-anticipated residual values and/or
higher-than-expected return rates for leased vehicles; and
- Inability to implement the Way Forward Plan.
We cannot be certain that any expectation, forecast or assumption
made by management in preparing these forward-looking statements
will prove accurate, or that any projection will be realized. It is
to be expected that there may be differences between projected and
actual results. Our forward-looking statements speak only as of the
date of their initial issuance, and we do not undertake any
obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future events or
otherwise.
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