Ford Motor Company Announces Revitalization Plan

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News of January 16, 2002

Ford Motor Company Announces Revitalization Plan

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DEARBORN, Mich. - Ford Motor Company announced several restructuring actions as part of its Ford Revitalization Plan, a product-focused program designed to strengthen its position in the marketplace and improve its financial results. These actions will enhance the company's ability to produce the highest level of quality cars and trucks while reducing the cost structure.

"Our revitalization plan is based on executing the fundamentals of our business to build great products," said Chairman and Chief Executive Officer Bill Ford. "What we are outlining today is a comprehensive plan that builds for the future. It's going to take everyone in the extended Ford family - employees, suppliers and dealers - working together, over time, to make it work."

The actions announced today include:

New products: A product-led revitalization program which will lead to the introduction of 20 new or freshened products in the U.S. annually between now and mid-decade. Plant capacity: Reduction of North American plant manufacturing operating capacity by about one million units by mid-decade to realign capacity with market conditions. Hourly workforce: About 12,000 hourly employees in North America are affected by the actions completed in December or to be taken throughout 2002 and beyond. An additional 3,000 hourly employees were affected in 2001. Plans are being made to reassign as many plant employees as possible.

Salaried workforce: Last year's voluntary separation program for salaried employees and other related actions resulted in a 3,500-person workforce reduction in North America. This program will be extended to achieve an additional 1,500-person salaried workforce reduction to reach the goal of 5,000. If necessary to meet this goal, an involuntary separation program will be used.

Global workforce: About 35,000 employees will be or already have been affected by combined actions around the world since January 2001. These include 21,500 in North America -- 15,000 hourly, 5,000 salaried and 1,500 agency employees -- and 13,500 in the rest of the world.

Material costs: A material cost-reduction program has been initiated with North American suppliers which shares design savings, with Ford receiving 65 percent of implemented cost reductions and suppliers receiving 35 percent in the first year. Designs will be developed that will help improve Ford's products and overall quality. This program, along with other material cost reduction efforts, is expected to improve ongoing annual profits before taxes by $3 billion by mid-decade.

Discontinued low-margins models: The Mercury Cougar, Mercury Villager, Lincoln Continental and Ford Escort will be discontinued this year. Beyond North America: Revitalization plans beyond North American automotive operations include the continued implementation of the European Transformation Strategy, the Premier Automotive Group strategy, the turnaround in South America and a revised direction for Ford Financial.

Divestitures: Ford is pursuing the sale of non-core assets and businesses. Ford's plans include $1 billion of cash realization from these actions in 2002.

Dividend: The annual common stock and Class B stock dividend will be reduced from 60 cents a share to 40 cents.

These actions and those already taken are expected to improve pre-tax operating results to $7 billion annually, an improvement of $9 billion by the middle of the decade. As part of the restructuring, the company will take an after-tax charge to fourth quarter earnings of $4.1 billion. The charge will cover several items, including asset impairments and personnel costs.

Today's announcement is part of an ongoing series of steps the company has taken over the past few months and will take in the future to restructure its business. Those taken earlier include the consolidation of car and truck product development in North America, a 50 percent dividend reduction, a 7 percent pay reduction to contract labor firms, a voluntary separation program for North American salaried employees, the elimination of bonuses and raises for senior managers, a sharing of health care costs with U.S. salaried employees and retirees, and the elimination of the company match for U.S. salaried employee 401(k) plans.

PLANT ACTIONS

Manufacturing plans over the next several years include: 1) Closing five plants: Edison Assembly, Ontario Truck Plant, St. Louis Assembly, Cleveland Aluminum Casting and Vulcan Forge; 2) No new products have been identified for two plants: Ohio Assembly and Cuautitlan Assembly, 3) Pursuing the sale of Woodhaven Forging Plant, 4) Major downsizing and shift reductions at 11 plants; and 5) Line speed reductions and changes to operating patterns at nine plants.

(Jan. 11, 2001)

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