Ford 2006 Annual Report Download - page 14
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Please find page 14 of the 2006 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Other Economic Factors. Additional factors have recently affected the performance of the automotive industry. In the
United States, 2006 was a period of a significant contraction in the housing market. As a result, residential construction of
new homes declined by 4.2% (after inflation). This adjustment had two effects on automotive sales and revenue –
directly, through its adverse effect on GDP growth, and as a contributing factor to potential softer demand for truck sales.
Both of these factors may continue to contribute to lower light vehicle sales in the United States.
CO2 Emissions Standards for Medium and Heavy Trucks. New, more stringent U.S. regulatory requirements for truck
emissions took effect on January 1, 2007, which increased the cost of engines used in medium and heavy trucks. These
standards did not apply to vehicles purchased prior to the implementation of the new regulations. As a result, sales of
medium and heavy trucks were elevated in 2006 as buyers pulled ahead orders that they would otherwise have made at a
later date. This may result in a deterioration of the sales pace for medium and heavy trucks in 2007.
Trends and Strategies
The global automotive marketplace has become increasingly fragmented and crowded, and we anticipate that this
trend will continue to accelerate into the future. Anticipating little growth in the overall volume of vehicles sold in North
America for the foreseeable future, we expect more manufacturers to offer an increasing number of products in this
market. To address this market reality and the factors and trends affecting the automotive industry discussed above, we
have been focusing on the following four key priorities:
x Restructuring the Company to be profitable at lower volumes and with a changed vehicle mix;
x Accelerating product development and reducing manufacturing complexity;
x Obtaining and maintaining adequate liquidity to fund the first two priorities; and
x Working together through teamwork and accountability.
Restructuring the Company
To compete more effectively in today's global marketplace, and particularly in North America, we have embarked on a
plan to restructure aggressively our Automotive business to address the realities of lower demand, higher fuel prices and
the shifting model mix from trucks and large SUVs to more fuel-efficient vehicles.
On January 23, 2006, we announced a major business improvement plan for our North American Automotive
operations, which we referred to as the Way Forward plan. On September 15, 2006, responding to changing facts and
circumstances, we announced an acceleration of this plan, including actions designed to further reduce operating costs
and increase the flow of new products.
Personnel reductions
Acceleration of the Way Forward plan includes additional reductions of our capacity and workforce to contribute to our
goal of reducing annual North America operating costs by about $5 billion by the end of 2008 as compared with 2005.
Our accelerated plan reduces salaried-related costs through the elimination of the equivalent of about 14,000 salaried-
related positions, which represents about one-third of our North American salaried workforce. This reduction includes our
elimination of the equivalent of nearly 5,000 salaried positions by the end of 2006; the additional reductions are being
achieved through early retirements, voluntary separations and, as necessary, involuntary separations, with most
employee departures expected to be completed by the end of the first quarter of 2007.
By agreement with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of
America ("UAW"), we also extended early retirement or separation packages to all U.S. hourly employees, including Ford
employees at our Automotive Components Holdings, LLC ("ACH") plants. Through year-end 2006, about 37,000 hourly
employees represented by the UAW had accepted (and not rescinded) an early retirement or separation offer. The vast
majority of these employees are expected to separate from the Company by September 2007, though many of the offers
include an opportunity for the employee to rescind acceptance until the time of separation. The accelerated plan to sell or
close all ACH facilities by the end of 2008 will result in additional personnel reductions.