Ford reduces workforce by 240

Workers offered voluntary redundancies or redeployment in the face of an uncertain future
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Ford Australia will offer 240 production line workers voluntary redundancy packages, to take effect from July.

The decision was made as a consequence of the manufacturer grappling with a volatile market over the past two years.

In conversation with the Carsales Network this morning, Ford's Public Affairs Director, Sinead McAlary laid out the rationale for the restructure.

"We've been running a number of 'down days' for the last couple of months," she explained. "That's obviously not a sustainable way to run the business, on-going. A number of our competitors have been doing it as well and the supply base has been screaming out to us for some more schedule stability.

"In the last couple of months last year and the first couple of months this year, we've examined where the market was going and decided it was better to realign our production with market demand -- and to do that in a structural way rather than continue running too many down days.

"So we'll be reducing production from the middle of July -- from 260 vehicles per day down to 209 vehicles per day. We'll be back to working five days a week at that point, but we'll obviously have lower output each day. It will stop the need for down days."

Ford will manage the human resource issue like a game of Kerplunk, pulling out a few straws here and there without the whole production process falling in a heap. 240 staff represent a significant proportion of Ford's 1800 manufacturing staff (out of 3400 in total), but the company is confident the redundancy and redeployment program can be carried out without any side effect other than a slower line speed.

"Our manufacturing director would probably hate to simplify it to this degree," McAlary continued, "but basically what we do... is slow everything down. At every station we have to rebalance the entire manufacturing footprint. In engine build, for example, we make less engines, obviously -- since we're making less cars. On the manufacturing line, in Broadmeadows, it's more a slowing down of the process. The cars take longer to go through each station, so people have more time to do what's required for each car. Therefore you need [fewer] people."

McAlary believes the restructuring will be felt more in the Campbellfield facility than in Geelong.

"There will be an impact across both sites; we haven't yet determined whether it will be a 50/50 split. At this point it's looking like Geelong... may be slightly less affected than Broadmeadows, because there's more opportunity in Geelong to redeploy people.

"Out at the casting plant, [with the] contract we have, we can actually move people from engine or stamping into the casting side of the business, if they chose to.

"Geelong gives -- this is a high-level view -- potentially more opportunities for redeployment, but that's another reason why we've come out and announced it ahead of time. Now we need to spend the next three months planning for it. We can actually work with our employees and the unions on 'where are the redeployment opportunities?' -- and where there's [none], our intent will be to offer voluntary redundancy packages.

The timing of the announcement comes barely a week after the company's high-profile launch of the new SZ Territory, which is yet to go on sale. Would McAlary have preferred to announce the restructure after the new SUV was already on sale?

"Particularly on the employee front, there's never a good time to announce anything that has a negative impact on the employees, but we've had to take into account where the Territory launch process is... and also the other launches we have coming up... throughout the year," she said.

"The announcement, the week after we did the media launch for Territory -- you could debate whether that's a good time or not, but we haven't actually gone on sale with Territory yet, so that's not the be-all and end-all of picking the right time to announce [staff reductions]."

Ford is due to announce its 2010 financial results within a matter of weeks -- and that may be yet another factor in the timing of the restructuring announcement. McAlary wouldn't be drawn on the question of profit or loss for 2010, but former Ford Australia President Marin Burela had intimated at AIMS in Sydney last year that the company was likely to post a profit for 2010.

Since the staff reductions in July and the Falcon sales slump for the first quarter of 2011 won't impact on last year's balance sheet, it might be inferred that Ford will remain on track to announce a profitable 2010. Furthermore, the changes to staffing levels in July may be the difference between profit and loss for the company in 2011.

Looking forward, McAlary suggested that Ford's product development initiatives (EcoLPi and EcoBoost Falcon) might well "arrest the decline of the large car segment" and, in the event that the two alternative-energy drivetrain variants prove a hit in the marketplace, Ford could ramp up production once more.

Production balance has been something of a problem for Ford over the past few years, according to McAlary.

"We reduced production in late 2008, but then -- through the last couple of months of 2009 and the first half of 2010 -- we were working overtime. We didn't actually increase our line speed, but we were working every second Saturday for more than six months.

"It's all about matching production to demand, so if demand goes down, you have to match production -- but when [demand] goes back up, you also have to match production."

The closure of Ford Credit had an unintended consequence in contributing to the drastic supply-and-demand fluctuations that have challenged Ford's manufacturing facilities since.

"One of the reasons we were working overtime, back in 2010 was because of the economy coming out of the Global Financial Crisis -- and our dealers were starting to come out of the issues that they had with wholesale financing..." said McAlary.

"So throughout 2009, a lot of our dealers had really de-stocked, to what was an unsustainable level -- once the economy started to come back up. They were clamouring for more cars; that's why... one of the reasons we were working overtime back then was to re-stock Ford dealerships around Australia."

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