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September 13, 2006 This Week:
© 1998 - 2006
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A summary of the North America Way Forward actions to be implemented by the end of 2008 and resulting financial impact: Product-Led Turnaround 70 percent of Ford, Lincoln and Mercury products by volume will be new or significantly upgraded from today through the end of 2008. The new lineup builds on Ford’s strength as America’s truck leader while expanding in growth segments, such as crossovers.
Ford will continue to lead America’s sports car market with new Mustang derivatives each year. The new Lincoln MKS flagship sedan will go on sale in 2008 – packed with more technology and features than any prior Lincoln, including all-wheel drive. Current plans are to produce the vehicle at the company’s Chicago Assembly Plant. Lincoln will continue offering the Lincoln Town Car to meet ongoing demand. After assembly ends at Ford’s Wixom ( Mich.) Assembly Plant in 2007, Ford intends to move Town Car production to Ford’s St. Thomas ( Ontario, Canada) Assembly Plant. St. Thomas will be reduced to one shift of production, as previously was announced.
In addition, two out of every three Ford, Lincoln and Mercury vehicles will be offered with fuel-saving 6-speed transmission technology by the end of 2008. The new products and a voluntary consolidation of the Ford and Lincoln Mercury dealer network are designed to significantly improve the dealers’ through-put and profitability by the end of 2008. Accelerated Cost Savings, Leaner Structure, Improved Efficiency Compared with 2005, annual operating costs will be reduced by about $5 billion by the end of 2008. Salaried-related costs will be reduced through the elimination of the equivalent of about 14,000 salaried-related positions, which represents approximately a third of Ford’s North American salaried work force. The reduction includes the equivalent of 4,000 positions eliminated in the first quarter of 2006. The additional reductions will be achieved through early retirements, voluntary separations and, if necessary, involuntary separations – with most employees expected to depart by the end of the first quarter in 2007. An agreement with the UAW will expand early retirement offers and separation packages to all Ford U.S. hourly employees, including Ford employees at the company’s ACH plants. Employees will begin receiving details by mid-October, and those accepting offers will leave the company by September 2007. Ford will accelerate by four years its previously announced goal of reducing 25,000 to 30,000 North American manufacturing employees by the end of 2012. The reductions now will be completed by the end of 2008. The sale or closure of all ACH facilities by the end of 2008 will result in additional employee reductions. Ford continues to work with the UAW to improve the competitiveness of its U.S. manufacturing facilities. As a result, new competitive operating agreements have been ratified by UAW locals in 30 different U.S. Ford and ACH facilities – and nearly $600 million in annual savings is projected to be realized. Capacity Further Aligned with Consumer Demand North America manufacturing capacity is being adjusted to 3.6 million units by the end of 2008, down 26 percent versus 2005 – in line with consumer demand and as announced earlier. Nine facilities will be idled and cease production through 2008, including seven already announced. The two additional plants are the Maumee ( Ohio) Stamping Plant and the Essex ( Ontario, Canada) Engine Plant. Ford’s Norfolk ( Va.) Assembly Plant will be idled a year earlier than planned, and a shift reduction, in advance of idling the facilities, now is planned at Norfolk and Twin Cities ( Minn.) Assembly. Facilities affected by the end of 2008 include the following:
Including Maumee Stamping and Essex Engine, Ford has announced plans to cease production at 16 North American manufacturing facilities by the end of 2012, including seven assembly plants. Financial Impact “Though North America’s return to profitability will take longer than planned, the actions we’re taking are the right ones, and are fundamental and necessary steps to improving our business structure,” said Leclair, the company’s CFO. “The planned improvements in our auto operations, in conjunction with Ford Credit – which remains a core asset – will leave us well-positioned for the future. “We are starting from a position of strong liquidity, including our cash, credit lines and VEBA,” Leclair added. “We will continue to focus on enhancing our liquidity, building upon our decision to explore strategic alternatives for Aston Martin and the board’s intent to eliminate our quarterly dividend.” Automotive Operations Full-year pre-tax special items for 2006 are expected to be significantly increased from the $3.8 billion we estimated previously to reflect the accelerated Way Forward actions. Further details will be provided when Ford announces Third Quarter financial results next month. Full-year profitability in North American automotive operations not expected before 2009 . Ford and Lincoln Mercury U.S. market share is projected to be in the low-16 percent range at the end of 2006. A further share decline is expected as production of the Ford Taurus sedan and Mercury Monterey minivan ends in 2006 and production of the Ford Freestar minivan ends in 2007. The end of these vehicles will reduce the company’s sales to daily rental fleets. With the investment in new products and improvements in quality, Ford expects to be in the 14 to 15 percent market share range going forward – with a focus on profitable retail share. South America and Ford of Europe still are expected to be solidly profitable in 2006. However, full-year operating losses now are expected in 2006 for Asia Pacific and Africa, as well as the Premier Automotive Group – primarily reflecting lower volumes. Liquidity Ford Motor Company’s 2006 year-end liquidity is expected to include automotive gross cash of about $20 billion, including marketable and loaned securities and the effects of $3.4 billion of VEBA. The company will continue to have committed automotive credit facilities totaling more than $6 billion . Ford Motor Company’s Board indicates that it will suspend payment of the quarterly dividend on its common and Class B Stock beginning in the fourth quarter of 2006. Sept. 15, 2006
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