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CNN Saturday Morning News
Interview With Csaba Csere
Aired January 12, 2002 - 09:24 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: Ford Motor Company is shifting -- it's shifting some of its operations into neutral and reverse. Twenty-two thousand Ford workers will be getting pink slips, and the auto giant announced it will close five plants as part of a restructuring plan.
CNN's Peter Viles has details.
(BEGIN VIDEOTAPE)
PETER VILES, CNN FINANCIAL NEWS (voice-over): From the shores of Lake Ontario, Canada...
BUZZ HARGROVE, CANADIAN AUTO WORKERS UNION: We are angry, we're frustrated. And we don't accept the logic of this decision.
VILES: ... to a suburban village in Ohio...
UNIDENTIFIED MALE: They did not accept the announcement very well. They felt that they put all they could put into it (inaudible), and yet they got shaft by Ford Motor Company in Detroit.
VILES: ... to the historic town of Edison, New Jersey.
MAYOR GEORGE SPADORO, EDISON, NEW JERSEY: This is really a shock that goes on. I mean, you know, this plant has been here 70 years.
VILES: Shock and dismay at the news Ford is cutting thousands of jobs, many of them by shutting down five plants across North America. Closing right away, Vulcan Forge, a parts plant in Michigan, 89 jobs. Following that, Brook Park, Ohio, 122 jobs. Then the big numbers, assembly plants in Edison, New Jersey, 1,570 jobs, Oakville, Ontario, 1,411 jobs, and the biggest of all, Hazelwood, near St. Louis, Missouri, where they make the Ford Explorer, 2,613 jobs.
In addition to these complete shutdowns, Ford will reduce the workforce at 20 other plants.
In Edison, New Jersey, where Ford makes the Ford Ranger, worker reaction was mixed and not entirely surprised.
UNIDENTIFIED MALE: I knew it was going to be -- you know, it wasn't going to be good, so I expected more, so that's what I got.
UNIDENTIFIED MALE: What's my reaction? I know it was coming.
VILES: The average salary before overtime is $49,000 a year at the Edison plant. Blue-collar jobs like that will be tough to replace in this economy.
BOB LAPOINTE, PRESIDENT, UAW LOCAL 980: You cannot go out and find jobs that'll pay you the salary and the hourly rate that you make in an auto industry. If you want to use the phrase "as a laborer," a production worker, there's no jobs out there.
VILES (on camera): As much as Ford is in a hurry to cut costs right now, it cannot rush these plant closings, and here's why. Its agreement with the United Auto Workers prevents Ford from closing any of these plants until September of 2003 at the very earliest.
This plant in Edison, New Jersey, will stay open until sometime in the year 2004.
Peter Viles, CNN, Edison, New Jersey.
(END VIDEOTAPE)
PHILLIPS: Well, for more now on Ford's restructuring, we turn to an authority on the automotive industry. Csaba Csere is editor in chief of "Car and Driver" magazine. He joins us from Ann Arbor, Michigan.
Good to see you, Csaba.
CSABA CSERE, "CAR AND DRIVER" MAGAZINE: Good morning.
PHILLIPS: Well, first of all, your reaction to this restructuring. Does it surprise you?
CSERE: Doesn't surprise me at all. Last year, Ford lost over $2 billion, and they really had to do something about that. And really the only thing they could do was reduce capacity, because right now, Ford was in this unhappy situation where the only way they could sustain sales was with very heavy incentives, and they couldn't make any money with those level of incentives.
But without those incentives, the number of cars they sold drops off, and at that point, the plants aren't operating at high enough capacity to make money. So the only way to solve this problem is to reduce capacity, and that's exactly what Ford has done.
PHILLIPS: So even though Ford's pickup remained number one, you know, as vehicles sold for the past 25 years, it just did -- that doesn't make enough difference, much of a difference.
CSERE: Well, the pickup truck has been strong, and it's profitable. But a lot of the other lines haven't done all that well. And what last year has shown was that there's more than just selling a lot of cars to profitability. You've got to sell these cars and make some profit margin on them. You know, the industry did $17.2 million sales last year, the second-best year in history, yet the big three are going to lose something like $6 billion. And it makes it clear that you've got to make profit margin on each vehicle, not just sell a whole bunch of them.
PHILLIPS: Jack Nasser was pushed out, Bill Ford has come in as the new CEO. Have you seen an impact? Have you seen a difference? And what do you think he has to offer that will pull this company back up?
CSERE: Well, so far, the difference has been relatively modest. There seems to be a warmer and more comfortable sense at the top of Ford. Worker morale is up a little bit. There seems to be less of an aggressive tone. But these sorts of announcements are always very difficult to take, and this takes its toll on morale. Really, it's going to be a couple of years before we see how well this restructuring works before we can see whether Bill Ford's doing the job or not.
PHILLIPS: So what's the strategy? How will these cuts make a difference? And what kind of timeline are we talking about?
CSERE: Well, I think what they're simply trying to do is, that at current levels of production, Ford can manufacturer about 5.7 million cars a year right now. They can't sell anywhere near that amount of cars without these profit-sapping incentives. So by slicing about a million units of capacity out of there, Ford hopefully will be able to sell something like 4.5 million cars a year at a profit.
That's the goal, but because of contracts, these plants can't really be taken offline for the next couple of years.
So Ford's in for a couple of very tough years, because the market is extremely competitive now.
PHILLIPS: Yes, I was wondering, are there any cars that we aren't going to see any more, for example, the Explorer that has been so popular?
CSERE: No, the Explorer's still going to stay there. Explorer is the best-selling sport utility in the country, and it was just redesigned about a year ago. Last year Ford sold over 400,000 Explorers. But there again, I'm not sure what the profit margin was on them. That's one of the vehicles that they have to really turn around.
Ford has cut four marginal vehicles in this announcement, the Ford Escort, the Mercury Villager, the Mercury Cougar, and the Lincoln Continental. That's not really great shakes. These vehicles were on borrowed time, and they weren't going to last long anyways.
The real key is cutting this capacity.
PHILLIPS: Before we let you go, outlook for 2002, does it look like imports will be the strong, the strong numbers, strong sales? CSERE: I think imports are going to continue to gain. In 2001, the big three domestics lost about 2 percent in market share, and I'm not sure they'll lose that much in 2002. But it's going to be very tough to regain, because the imports are out there with very strong new products, and many of the import companies right now are very profitable. The yen is working in favor of the Japanese, and that means they're going to keep the pressure on.
So it's going to be a tough road back for the big three.
PHILLIPS: Little investment advice there too. Csaba Csere, editor in chief of "Car and Driver" magazine, thank you so much.
CSERE: You're welcome.
PHILLIPS: All right.
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