Ford speeds up production cuts

Ford Motor Co. said Friday that it will cut its fourth-quarter vehicle production by 21 percent in North America in an attempt to stem big losses and jump-start a turnaround it's been promising for years.

The change will result in more downtime at Ford's St. Paul Ranger truck plant as well as nine other plants, officials said.

The company will also work with dealers to reduce the number of dealerships in metropolitan areas in the Midwest and east of the Mississippi River, officials said this week.

Ford's North American auto unit, which lost more than $1 billion last year and $254 million in the second quarter of this year, also announced Friday that its third-quarter production will be chopped by 20,000 vehicles. For the year, production will be cut 9 percent to 3.048 million vehicles, officials said Friday.

"We know this decision will have a dramatic impact on our employees as well as our suppliers," Chief Executive Bill Ford said in a message to employees. "This is, however, the right call for our customers, our dealers and our long-term future."

The changes indicate the speeding up of the Ford "Way Forward" restructuring plan that originally called for cutting 30,000 employees and closing 14 plants, including the 1,800-worker plant in St. Paul.

That plant is scheduled to close sometime in 2008. But in early media reports Thursday, the Wall Street Journal cited unnamed sources saying St. Paul and several other plants might now be closed sooner than originally planned. The Journal later removed the St. Paul plant from that list.

Ford officials declined to comment beyond saying it was one of 10 plants that would experience more downtime between now and the end of the year.

Ford spokeswoman Anne Marie Gattari said, "When we have something to announce we'll put out a media advisory. Until then, anything moving anywhere or being discussed or reported is all speculation."

Jim Eagle, chairman of the UAW Local 879 in St. Paul, said the union has not heard any news about Ford's plans regarding the Ranger plant, now the only plant in North America that makes the compact truck. Ranger sales are down 25 percent this year after falling 23 percent last year and 30 percent in 2004.

As a result, the 1,800 workers in St. Paul have faced more than 20 weeks of furloughs over the past two years. The plant was shut down for the entire month of July and employees said they received notices on July 31 that said the plant will have two more weeks of furloughs in September and another two in October.

As for revisions to that plan, Eagle said the union has not been told anything. "We have no definite answers on anything. We are waiting for any information."

The Minnesota Department of Employment and Economic Development said Friday that some Ford workers are beginning to enroll in the state's Displaced Workers Program.

"Normally, employees subject to mass layoffs can't apply for assistance any sooner than six months before the actual layoff," department spokeswoman Kit Borgman said. The recent policy change affects only Ford employees and lets them apply immediately, she said.

As a result, members of Local 879 celebrate their annual picnic this weekend and can begin one-on-one career planning and counseling sessions with state workers on Monday.

Earlier this month, Ford officials said they told dealers attending a trade show in Las Vegas that they would work to reduce the number of urban Ford dealerships to try to boost dealer profitability.

"In some urban and metropolitan markets we have more dealers than our sales and market share can support," Ford spokesman Jim Cain said.

Decisions about who will close, merge or sell will be handled through private conversations, Cain said. He declined to say if any of the targeted dealerships are in Minnesota or Wisconsin, which have 111 and 141 Ford or Mercury dealerships, respectively.

"We are not naming markets," Cain said. "We are going to be meeting with dealers individually. ... And together we are going to try to arrive at a solution that improves sales per dealer."

Ford has 4,300 dealers nationwide, most of them in 18 U.S. markets.

Dealers have complained that the large number of dealerships in some markets was hurting profits. In Las Vegas, "We told dealers that we heard their concerns about overall profitability and that we were going to take steps to build a stronger business both for them and for us, one that could be profitable throughout the business cycle," Cain said.

Era of the 'Big Six'

The problem is partly a function of how Ford grew its dealerships over the past few decades and of global competition. "We have gone from an era of the Big Three automakers to one of the Big Six," Cain said, referring to Japanese competitors Toyota, Nissan and Honda in addition to Ford, General Motors and DaimlerChrysler.

The diminishing popularity of profitable but gas-guzzling SUVs and trucks has collided with stiffer competition from foreign automakers.

Ford's U.S. market share has dropped from 24 percent in 1990 to 17.4 percent last year. In July, Toyota for the first time outsold Ford to become the second-largest U.S. auto seller.

But John Berken, owner of Forest Lake Ford, said he is not aware of dealers here complaining that their industry has to be consolidated. Berken, who attended the Las Vegas show, said the worry was not a key concern among the other franchise Ford dealers that he spoke with. And personally, profits are not a problem.

"We are in a growing area. It's a metro area. And right now, it's not a problem," he said.

"In the state of Minnesota, the franchise laws are pretty stringent," said Mark Mastel, a manager at Midway Ford in Roseville.

Ford would be leaving itself "wide open for a bunch of lawsuits" if it tried to force dealers to merge or sell, Mastel said.

Dee DePass • 612-673-7725 • ddepass@startribune.com