Ford Cutting N. American Production and Jobs

Ford is going to cut production in its North American facilities by 21% in the fourth quarter. Ford also plans to eliminate an estimated 6,000 salaried positions as well as 30,000 jobs in general by 2012.

Chief Executive Officer William Clay Ford Jr., great- grandson of founder Henry Ford, is shedding jobs and closing plants as he tries to revive the North American auto operations that have lost money in seven of the past eight quarters.

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Ford’s North American finances will worsen because the company records revenue when vehicles are shipped to dealers. The North American unit was already under strain because of falling sales of pickups and sport-utility vehicles.

Fitch Ratings cut Ford’s credit rating one level to “B,” five steps below investment grade, and Standard and Poor’s said it is considering a downgrade from its “B+” rating.

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Ford announced its “Way Forward” restructuring plan in January, including the 30,000 job cuts to be completed by 2012. The company said in July it would accelerate restructuring after recording a $1.44 billion first-half loss, led by losses in North America.

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Ford’s 7.45 percent bond due July 2031 rose .25 cent on the dollar to 79 cents on the dollar. The yield fell to 9.698 percent from 9.73 percent.

The perceived risk of owning Ford’s debt increased in the credit-default swap market. Contracts based on $10 million of Ford debt climbed to $640,250 from $636,000 yesterday, according to data compiled by Bloomberg.

Not exactly good news for the economy. Hopefully with the end of driving season and oil prices easing, growth will remain positive through the rest of 2006.

FILED UNDER: Economics and Business, ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Actually Steve, I think this is good news for the market. Ford is losing business partly because it has THE worst record on fuel consumption and has focused too much on SUVs. Perhaps they’ll start realizing they need to change. Sometimes, news this bad is a kick in the pants and a message that you need to change gears.

    In any case, we’ll see.