Analysis of Ford Buyouts
Here is a current blog post (11/30/06) for those of you looking to read about the accepted Ford buyouts.
From a friend…..
Here’s a creative, preemptive move most certainly designed to head off the potential impact of a huge flux into the jobs bank. The Way Forward plan announced late January called for the elimination of 30,000 hourly jobs over the next 6 years. It is expected that half of these will be cut through attrition, but the other half will need to be encouraged to leave voluntarily. While yet to be agreed to by the union (which must be done at the local level), here’s the layout of the options Ford is offering:
· A special $100,000 buyout offer for those who agree to leave the company and forgo all benefits except pension benefits they have accrued.
· An Educational Opportunity Program to help workers move into a new career. The program provides workers with at least one year of seniority with up to $15,000 a year for tuition to an accredited school of their choice for up to four years. Those workers will receive full medical benefits and half their regular pay while they attend school.
· Two early retirement programs. The first is for workers 55 and older who have 30 or more years with the company. They will receive a $35,000 check and begin retirement immediately, with full retirement benefits. The other program is for workers 50 and older with 10 or more years at the company. They will be provided a fixed level of income for life, though not as much as they would receive through the regular retirement program. The amount will vary from individual to individual, Mulloy said.
· Finally, a special pre-retirement leave program for workers with 28 years of service but not yet 30 years. Ford will allow those workers to take a leave — where they will receive 85 percent of their pay — until they reach 30 years of service.
Employees who take one of these packages will not enter the infamous Job Bank. This will be key to lowering ongoing operational expenses in the short term. Keeping job bank numbers low will also likely help Ford when it comes to contract negotiations in 2007.
Crunching some quick numbers, assuming the average cost of all the options is $100, 000 per employee and half of 30,000 employees are offered a buyout package and accept, the total cost for the program will be around $1.5 billion. While I don’t disagree that Ford needs to rationalize capacity in order to stop the bleeding short term, I also feel that it is unfortunate that $1.5 billion will not be spent on future products, manufacturing or other system improvements focused on long term advancements and growth.