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A smaller Ford

Tuesday, January 24, 2006
Yesterday, Ford Motor Company announced that - in order to stem BILLIONS of dollars in annual losses - they were embarking on an ambitious restructuring program that would shut down several manufacturing plants and lay off thousands of workers.

Of course, the United Auto Workers are opposing this, claiming that shrinking an expensive workforce is not the way to profitability. Perhaps they're right. According to this report that I heard last night on NPR, laid off hourly workers from Ford aren't really laid off, per se. They're "idled" until the end of their contract, which means they'll receive up to 90% pay, full benefits, and more.

I love this quote from the UAW press release:
...Ford’s new ‘Way Forward’ is based on cutting jobs and closing facilities to ‘align’ Ford’s production capacity with shrinking demand for Ford’s vehicles. Then, as now, the focus should instead be on striving to gain market share in this competitive market by offering consumers innovative and appealing products.
This is, of course, a typical response from a union... and they're right. Due to the UAW's "job security" contract, Ford isn't saving money yet. But to have the arrogance to say that Ford should be focusing on growing their market is to have their head stuck in the sand. The market determines Ford's fate.

Every move Ford makes is a risk, and they have to balance the needs of their customers, their employees, and their shareholders, as well as fending off the competition. With the union's inflexibility, that leaves the customers and shareholders to adjust. Shareholders - the ones who own the company - are also inflexible. That means that the customers are the only ones that Ford can lean on to adjust. However, with the auto market competition the way it is, customers flock from Ford to Toyota or any other company that can produce a less expensive, quality automobile because their cost of operation is lower.

What does this mean for Ford? Static costs, but falling revenue, which means falling profits... which eventually will no more Ford unless something changes.

3 Comments:

Blogger JonTheDoc said...

...or, they could lay off one CEO and be done with it. Millions of dollars saved, only one job lost.

2:49 AM, January 25, 2006  
Blogger Burton said...

Yeah, but in this case the CEO is Bill Ford. Kinda hard to lay off the grandson (I think) of the founder of the company.

8:49 AM, January 25, 2006  
Blogger Burton said...

I checked. Bill Ford is the great-grandson of Henry Ford, I believe.

9:02 AM, January 25, 2006  

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