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American Morning

Ford to Cut 5,000 Jobs

Aired August 17, 2001 - 10:12   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: In corporate news, as many as 5,000 white-collar workers will soon lose their jobs at Ford. The nation's No. 2 automaker announced this morning that it will offer early retirement to cut costs.

CNN Financial News reporter Peter Viles joins us from New York. He has more details for us -- hi, Peter.

PETER VILES, CNN CORRESPONDENT: Hi, Kyra.

Well, it seems like we get one of these big announcements every couple of days now -- this morning's from Ford -- as you said, 4,000 to 5,000 white-collar jobs. Ford says these are not layoffs. It says it is a -- quote -- "voluntary separation program" -- Ford taking a $700 million charge to pay for it.

That works out to about $155,000 per worker if they get 4,500 -- not that the workers will actually get that money. But Ford will put that into their pensions and severance packages and whatever and the cost of doing away with these jobs.

Now, you have to ask yourself, if you're watching: Why does corporate America keep doing this to itself? Why are they cutting these thousands of jobs? Don't know they know that will make the economy worse? Well, something else that Ford announced today will help make sense of this. Their profits -- Wall Street had expected $1.20 per share in profits this year, even knowing how bad the economy is.

Well, Ford came out this morning and said: It's much worse than you think it is. We're only going to make 70 cents per share. Their profits are falling very rapidly. They have to do something to fix the situation. They can't sell more cars, and that's the problem. They are not selling as many as they want to. They can't raise the prices of the cars. They're already spending a lot on incentives.

What can they control? Their own costs -- and the fastest way for them to do this is white-collar costs, because with the union workers, the factory workers, you sometimes don't save much money if you keep them off the job. So that's what Ford is doing. They're responding. They're trying to fix their financial house, if you will.

One other item: Is Firestone a factor in this? Not obviously -- Ford didn't mention Firestone. It could be that the Firestone/Explorer fiasco is hurting their sales. But Ford did not say that. The one specific problem Ford mentioned is some warranties that are turning out to be pretty expensive, particularly on Windstar vans. They're having to replace a lot of transmissions on vans that they sold years ago. And that's cutting into earnings -- but a pretty negative report this morning from Ford.

And Ford shares are coming under pressure on Wall Street today, Kyra.

PHILLIPS: All right, Peter Viles, thanks so much.

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