Ford, Rivals Stress New Parsimony to CongressBy Michelle Krebs December 2, 2008
By Bill Visnic
Scrambling to enlist the aid of the federal government in surviving the nation's drastic economic downturn, Ford Motor Co., General Motors Corp. and Chrysler LLC are submitting today their restructuring "blueprints" that will have at least one element in common: symbolic pay cuts for their chief executive officers and pledges to accelerate the introduction of higher-efficiency models and technologies.
Ford CEO Alan Mulally will work for $1 per year, Ford announced, and it is believed GM CEO Rick Wagoner will do the same when his company releases details of the company's plan later today. Chrysler CEO Robert Nardelli already had offered to work for $1.
The Detroit Three today are turning in to the U.S. Congress outlines that more specifically spell out how their respective operations will be reorganized to enable them to survive once given the $25 billion in federal "bridge loans" they have said they need to survive.
In the Detroit automakers' initial hearings with Congress last month to request the loan package, the lawmakers refused to commit the funds, sending the companies' CEO's back to their desks, like lazy college freshman who had presented slapped-together term papers, to fashion more credible turnaround plans that would justify $25 billion in taxpayer funding.
Ford's report, released earlier today, spells out precisely what the company would like: a $9-billion "standby" line of credit at government-established low interest rates and under the same conditions as the funds loaned under the Troubled Assets Relief Program (TARP) that earmarked some $700 billion to bail out the financial sector.
Ford's plan seems to stress, however, size- and cost-cutting efforts that already were underway, such as the shuttering of 17 plants in the past five years, recent moves to sell its Jaguar and Land Rover units, restructuring of its holdings under mega-supplier Visteon Corp. and the cost-cutting concessions won in 2007 from the United Auto Workers Union.
Some of the specific new measures Ford proposes:
- "Balancing" its product portfolio to deemphasize high-consumption trucks and SUVs and introduce more efficient models, many of which will come from the company's European operations.
- Hike the percentage of "advanced technology vehicles" to 75 percent by 2011 and 90 percent by 2014.
- Increase and accelerate the "electrification" of Ford's product range, with a claim that by 2012 Ford will have a "family" of hybrids, plug-in hybrids and fully electric vehicles for sale.
- Reduce its dealer ranks. By year-end, Ford expects to have 606 fewer dealers, a 14 percent decline.
- Slash the supplier ranks from today's 1,600 to 750. In 2004, Ford had 3,300 suppliers.
Ford also slipped in a plea to retain national fuel-economy standards rather than allow individual states to do so. This is a direct reference to the long-controversial plan by California -- and the numerous other states that have adopted its emissions standards -- to regulate vehicular carbon-dioxide emissions, and by extension, fuel economy.
"We share Congress' concern that our industry needs an aggressive restructuring, and we at Ford already have undertaken many of the decisive actions that we believe are necessary to ensure our future success," Ford's report says.
Although many in the industry were expecting plans from Ford and GM that might do away with one or more of their "internal" divisions in a move to cut costs, it appears Volvo is the only division in Ford's immediate vision, and much the same might be true at GM, where a move to cut Saab and the already-on-the-block Hummer unit could be perceived as enough to show the company is making the effort to downsize. GM may yet consider further merging its second-level marketing divisions that include Saturn, Buick, Pontiac and GMC.
More will be known on the topic when GM makes public the provisions of its restructuring plan later on Tuesday.