What That Ford Memo Could Have Said

Obviously, layoffs that affect employees and their families are no joke. It is necessary to understand that businesses do walk a tightrope of sorts. They must manage a company through the ebbs and flows of the economy, balancing between periods of expansion and contraction while remaining profitable.

The American automotive industry has been a cash cow for management and labor of the big three for decades. Huge stockpiles of corporate cash and a consumer base that remained largely unexposed to foreign designed products kept the cash pipeline flowing. The domestic automobile industry could do no wrong because the consumer saw no alternative. There were speed bumps on the road, but it wasn't until the 70's and early 80's, when foreign made vehicles became popular, that it became evident that Detroit was doing something wrong.

Here we are now, thirty some years later, and the domestic automobile industry is just now beginning to rethink its overall corporate strategies. Mark Fields, Ford Motor Company's president of the America's, sent out a memorandum spelling out to salaried worker's at Ford some of the changes that the company feels are now necessary to right the listing ship.

I read the memorandum with both hope that a lasting philosophical change at the automaker (and the greater domestic automotive industry) will take root, and with sadness because I have known many people that have lived good, prosperous lives and raised wonderful families because of the wages earned in the huge factories of central and southern Michigan. Automobiles have been the life blood of Michigan for nearly a century, and witnessing the suffering of a treasured icon is never easy.

I also read the memorandum with a certain amount of skepticism and impatience. While industry management can certainly not shoulder all the blame for the industry's demise (adversarial labor unions and bureaucracies also share a hefty load of the blame,) it is the common knowledge of any Michigander with friends and relatives that work amidst the smokestacks, that the big three are models of inefficiency and laughable mismanagement.

This crash is not sudden but had to be expected by anyone paying attention.

Here is an alternate memorandum that could just as easily have been written. (The link to the actual memorandum written by Mark Fields is below.)

SUBJECT: Detail on business plan updates

Two weeks ago, only years after we noticed things were going downhill quickly, we announced that rapidly deteriorating business conditions -- and a dramatic acceleration in consumer shifts away from large pickups and SUVs to smaller cars and crossovers (oddly, a market trend only discernible by our foreign competitors) -- have made it necessary for us to accelerate our North America transformation plan. We are in trouble boys, this party has ended.

While the fundamentals of our North American business are stronger than they were when we started our recovery effort more than two years ago, at least if you don't count selling cars, we're facing new and greater challenges as an industry. Lower industry volumes and stupid consumers that have chosen to buy vehicles that they like better and break down less often, together with the cost of steel and other commodities, directly affect our bottom line. As we previously announced, we no longer expect Ford North America to return to profitability in 2009.

Clearly, as we've stood here in cement shoes for the past few years watching impotently as business conditions deteriorated in North America, it's finally become so obvious that we have to act that even we have figured it out. In addition to realigning production, we need to bring costs in line. As one element of that, we've had to examine salaried-related costs--let's face it, we are the morons that got us into this mess through years of blockheadedness. In keeping with our commitment to communicate decisions first with employees, particularly those unable to look at the huge red-letter writing on the wall, today I'd like to share the actions that we will need to take if we are ever going to be able stay afloat.

Our plan is to reduce salaried-related costs in North America by 15% by Aug. 1. We probably should have done this years ago, but dieting isn't fun when the buffet is open. This unfortunately will result in involuntary separations of Ford employees and agency personnel, as well as cost savings through attrition and consolidation of open positions as we eliminate positions that were unnecessary since, oh, forever. We won't know the exact number of job reductions that we will be making until we begin to figure out exactly what all you guys have been doing up until this point. The only protected positions here will be for those running the Fantasy Football Leagues.

We also are making some employee compensation and benefit changes to further reduce costs.

These include:

• A further delay of merit increase payments for employees in the United States and Canada until someone actually merits one;

• An immediate suspension of the U.S. Salaried Tuition Assistance Program--it hasn't helped us a bit, look at the mess we are in;

• An immediate suspension of the U.S. Salaried Dependent Scholarship Program, see above and

• A $25,000 cap on company-paid Retiree Basic Life Insurance for previously eligible existing and future U.S. salaried retirees, effective Aug. 1, because we figure none of you salaried workers would be able to afford a $25K life insurance policy on your own. ...

Health care benefits, 401(k) matching funds and other benefits remain unchanged, along with our commitment to keep you informed of the latest challenges. We will probably cut this later however, when we discover that the cars we produce still won't be able to compete with other companies that provide models that people actually want.

We realize the effect these actions will have on you and your families. While this has been a difficult period for all of us, it's important to remember our hard work in recent years has positioned the company to better withstand the challenges our previously pathetic visions have helped us create.

The new products we've launched during the past two years have been successful in the marketplace, and we are on plan with our commitment for 70% of our Ford, Lincoln and Mercury lineup to be new or significantly upgraded by the end of this year -- and 100% by the end of 2010. This makes us very late to the party, but we affirm to you that we will remain inflexible in our goals so that, should market conditions and consumer trends change, we will not be able to significantly alter our momentum until we once again find ourselves sitting solidly behind the eight ball with our stockholders footing the bill. We have not announced new products beyond that time frame -- but we absolutely remain committed to the second part of our plan, which is to accelerate the development of new products that customers want and value. We've decided that this is a good idea after all these years.

In the near-term, we already have announced expanding the use of our fuel-efficient six-speed transmissions, adding new fuel-saving EcoBoost engine technology in 2009, bringing a new European-engineered Transit Connect in 2009 and the new Ford Fiesta small car in 2010.

We've also shown tremendous progress and resolve in cost reductions and are on track to meet our goal of taking $5 billion in cost out of the system by year-end, while delivering quality products on par with the best in the business. Going forward, we will begin to fully realize the benefits of our more competitive contracts with the UAW and CAW, as well--how did we get suckered into the old ones?--I hope the guy responsible for that nonsense is one of the ones getting the ax.

Ultimately, we believe we have the best plan for facing these industry challenges. And we know that companies that deal with these market realities with the greatest sense of urgency and the best executions of their plans will succeed. We've already seen this as we transformed Ford in Europe and South America. With even greater resolve, we can do the same in North America.

As managers, you will receive cascade materials later this morning to help you in conducting discussions with employees about these actions. Thank you for all your hard work and remember, try and look busy!

Original text in the Freep.