Ford's Aggressive Plan to Cut Costs

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Ford May Cut Salaried Costs 30% As Restructuring Push Accelerates

• Summary: Continuing its restructuring, Ford (F) announced that it will seek job and benefit cuts, with the goal of reducing overall salary costs by 30%. Staff reduction will be mostly at manager/supervisor levels, and Ford hopes that most job cuts will be through early retirement offers, employee buyouts and normal attrition. Layoffs will be the last resort. Ford also seeks to save on benefit costs, which will include cuts to pensions and health-care plans. Separately, Ford announced a new approach to car pricing, which will focus on selling cars closer to the full sticker price. Vehicle production volume will be adjusted to meet demand by idling or closing plants if necessary. The goal is to avoid building too many cars, which then requires the offering of costly incentives to move them off dealer lots.
• Comment on related stocks/ETFs: This latest move in Ford's reorganization follows its announced intention to sell its Aston Martin nameplate. While Ford's $1.6 billion loss was dwarfed by GM's (GM) $11.3 billion loss, the domestic Big 3 face increasing competition from Toyota (TM) which made $12.6 billion last year. While the reorganization addresses Ford's overcapacity issue, it remains to bee seen if they can build products which resonate with the American public.

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