Not only GM: Morgan Stanley Predicts Ford to Cut 25,000 Jobs in Overhaul

Ford Motor Co.’s $11 billion restructuring could cost 25,000 employees their jobs, exceeding the cutbacks General Motors Co. announced last week, according to Morgan Stanley. Ford has yet to detail its job cuts, but Morgan Stanley analyst Adam Jonas predicts they could be larger than GM’s in a note to investors. “We estimate a large portion of Ford’s restructuring actions will be focused on Ford Europe, a business we currently value at negative $7 billion,” Jonas wrote. “But we also expect a significant restructuring effort in North America, involving significant numbers of both salaried and hourly UAW and CAW workers. Ford’s 70,000 salaried employees have been told they face unspecified job losses by the middle of next year as the automaker works through an “organizational redesign” aimed at creating a white-collar workforce “designed for speed,” according to Karen Hampton, a spokeswoman. “These actions will come largely outside of North America,” Hampton said of Ford’s restructuring. “All of this work is ongoing and publishing a job-reduction figure at this point would be pure speculation". Ford also is cutting shifts at two U.S. factories in the spring and transferring workers to plants building big SUVs and transmissions for pickups in moves that the automaker said will not result in job reductions.
 

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Is not sounds pretty at all

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If they continue with this intensity, I predict that Ford, GM, and Fiat-Chrysler will all be bankrupt within 5-8 years...

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Tariffs, tariffs and tariffs....  The metals tariffs "took" about $1 billion in profit from Ford

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Ford stock is down over 20% since tariffs have started.

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Sounds familiar, so close 2008...Some people never learn lessons

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(edited)

Trump’s commerce secretary: tariffs raising car prices $175 is “trivial”

https://www.vox.com/2018/3/2/17072268/wilbur-ross-tariff-steel-big-deal 

Largest iron and aluminum producing countries. 

https://en.wikipedia.org/wiki/List_of_countries_by_iron_ore_production

https://en.wikipedia.org/wiki/Iron_Range  American iron ore. 

https://investingnews.com/daily/resource-investing/industrial-metals-investing/aluminum-investing/aluminum-producing-countries/

Metal/MaterialCurrent Price

$0.055-$0.09/lb

$0.055/lb

$0.085-$0.10/lb

$0.09/lb

Edited by ronwagn
reference
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(edited)

Don't be surprised if Ford ends up shutting down and scrapping its last big assembly plant in Canada, the Ford Oakville operation.  That Ford plant is sitting on top of very valuable real estate; the expansion of Metro Toronto  (Oakville is a suburb of Toronto) with massive Canadian immigration flows has pushed housing prices through the roof, with the average house now selling at $1.2 million (!).  Tearing down the old plant and selling off the house lots makes good business sense. 

The Ford Oakville plant now has limited production, the largest share being the assembly of the Ford "Edge" model, basically an "SUV Crossover," a utility vehicle that rides like a car. Other than that, it builds the Ford "Flex," basically a large station wagon.  After the police cars built at the St. Thomas, Ontario, plant stopped production after the 2008 financial crash (and Ford's deep sales problems resulting from its customers having no cash), Oakville is what is left, other than some small casting plants down in Windsor.  

Meanwhile, Ford has had to deal with a ridiculous Canadian Auto Workers Union (the CAW), which seems to have taken the attitude that they own those plants and they will determine what is built, how, and when.  These labor problems make even the deeply discounted Canadian currency less appealing.  If Ford shuts down Oakville, it finally ends its contentious relations with the CAW and gets some nice cash for the land. Hey, could happen. 

Canadian auto production could continue with Asian builders such as Honda and Toyota  (also a small Kia assembly plant), which build smaller numbers of sedans and the RAV4.  These low-volume plants basically build for the Canadian market, although the Honda Civic is largely exported to the USA.  Will they also fold up and send production to Mexico?  Hard to tell.  They are in outlying areas of Toronto on less-expensive real estate, and the workers live in less-expensive houses also outside Toronto.  Where Canada went wrong was in uncontrolled immigration, pumping the population up from 25 million to 36 million, all of which settled in Toronto and Vancouver, and pushing their house prices into the stratosphere.  But that makes manufacturing also much more expensive; high house prices cause high wage-inflation demands from the unions. 

Canada is entering a dangerous phase, facing the ultimate shutdown of all Canadian auto building.  There are some 140,000 jobs directly tied to the auto industry, and most of the output is geared for export sales.  IF this happens, then Canada is headed for a world of hurt.  Politicians tend not to understand the results of their policies.  We call politicians "stupid;"  I tend to call them unaware and unthinking.  Ford Oakville and GM Oshawa are the big players up there; now that Oshawa is getting scrapped, Ford Oakville is the kingpin for the industry future.  

Personally, I expect Ford to shut down Oakville and dismiss 5,000 workers.  It has no logical reason to continue Canadian manufacturing.  Blame the politicians for their profound inability to grasp the industry fundamentals. 

Edited by Jan van Eck
scrivener error
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The auto industry worldwide seems to love our Southerners. They are easy to deal with apparently. I am a fan of Canada but Trudeau is the worst thing I have seen happen there lately. You should run Jan. 

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On 12/4/2018 at 7:58 PM, Jan van Eck said:

The Ford Oakville plant now has limited production, the largest share being the assembly of the Ford "Edge" model, basically an "SUV Crossover," a utility vehicle that rides like a car. Other than that, it builds the Ford "Flex," basically a large station wagon.  After the police cars built at the St. Thomas, Ontario, plant stopped production after the 2008 financial crash (and Ford's deep sales problems resulting from its customers having no cash), Oakville is what is left, other than some small casting plants does in Windsor.  

Ford has already announce the future, and it doesn't include these product lines.  That plant would indeed appear to be doomed.  If I were a worker there or a resident nearby, I would make serious strides for the exits before they close the doors.  If anyone reading this thread is from that area, PLEASE take a look at what happened at other cities in NA that lost their auto plants.  Sell out at the best price you can get, and leave.  Even if you grew up there and have had a parent and/or grandparent working at Ford before you; do you want to come back to a ghetto for Christmas future?

I sincerely "hope" it doesn't go that far, but can you take that chance?  This world does not wait for laborers, especially expensive ones, anymore.  Those days are gone with our parent's generation.  Hell, many of that generation have already been beaten badly and it's not going to get better before it gets worse.  Ask them.

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This is very similar to what happened in Australia.  The labor became too expensive and the auto manufactures closed the plants. 

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20 hours ago, ronwagn said:

The auto industry worldwide seems to love our Southerners. They are easy to deal with apparently. I am a fan of Canada but Trudeau is the worst thing I have seen happen there lately. You should run Jan. 

I left Canada and closed my plants there over 30 years ago, I saw it coming back then.  Happy in the USA. 

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9 hours ago, Dan Warnick said:

Ford has already announce the future, and it doesn't include these product lines.  That plant would indeed appear to be doomed.  If I were a worker there or a resident nearby, I would make serious strides for the exits before they close the doors.  If anyone reading this thread is from that area, PLEASE take a look at what happened at other cities in NA that lost their auto plants.  Sell out at the best price you can get, and leave.  Even if you grew up there and have had a parent and/or grandparent working at Ford before you; do you want to come back to a ghetto for Christmas future?

 

In the case of Oakville, it will not be anywhere near the type of hit that you get in old-line manufacturing areas such as Janesville, Wisconsin.  There, the GM plant has a huge impact on the area.  While Ford Oakville closing will have its costs, it will likely not decimate the area.  The land is increasingly valuable and after the plant is torn down, then apartment towers and condominiums are likely to be built.  The influx of ten million "new Canadians" has placed serious pressure on the housing stock, and there is not anywhere near enough land available. The real issue is with the parts companies. What most people do not realize is that an auto company is not really a car builder; they are assemblers of parts made by others.  So, Chrysler typically buys out some 70% of the parts that go into a car.  You may get these metal-stamping operations to build the auto body, where the stampings go directly to the paint line and then the welding line, but you don't have in-house manufacturing of the vast numbers of other parts, the seats, wiring harnesses, dashboards, bumpers, window glass, door motors and mirrors, and all the other little and big parts that go in there.  And it is those plants that  feed Ford and that are going to take the hit.  That is where the real pain is going to be. 

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13 hours ago, Jan van Eck said:

In the case of Oakville, it will not be anywhere near the type of hit that you get in old-line manufacturing areas such as Janesville, Wisconsin.  There, the GM plant has a huge impact on the area.  While Ford Oakville closing will have its costs, it will likely not decimate the area.  The land is increasingly valuable and after the plant is torn down, then apartment towers and condominiums are likely to be built.  The influx of ten million "new Canadians" has placed serious pressure on the housing stock, and there is not anywhere near enough land available. The real issue is with the parts companies. What most people do not realize is that an auto company is not really a car builder; they are assemblers of parts made by others.  So, Chrysler typically buys out some 70% of the parts that go into a car.  You may get these metal-stamping operations to build the auto body, where the stampings go directly to the paint line and then the welding line, but you don't have in-house manufacturing of the vast numbers of other parts, the seats, wiring harnesses, dashboards, bumpers, window glass, door motors and mirrors, and all the other little and big parts that go in there.  And it is those plants that  feed Ford and that are going to take the hit.  That is where the real pain is going to be. 

Respectfully disagree on this one, Jan.  Ford Oakville employs 4.600 people directly.  Have a look at these salaries.  Anyone think Mexico can beat those?  It is worth noting that of the salaries listed there, many of them are for contractors.  I wonder if the contractors are included in the "employs 4,600" number?  Then, if you look at the top 100 employers in Oakville, you will note Ford at the top with a large majority of the employers next in line being schools, healthcare, government, and consumer-type stores and restaurants.  Companies and entities that exist off of and/or feed the Ford workers.  If Ford closed its doors, many of the other companies would die, although that may take a bit of time.  The tax base would shrink causing tax rates to increase.  Any local companies that feed any goods or services to Ford would be done and leave as well.  Property values would crash within 6-12 months, or sooner.  I say the town would die for all intents and purposes; the question is whether it would be slow or fast.

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6 minutes ago, Dan Warnick said:

Respectfully disagree on this one, Jan.  Ford Oakville employs 4.600 people directly.  Have a look at these salaries.  Anyone think Mexico can beat those?  It is worth noting that of the salaries listed there, many of them are for contractors.  I wonder if the contractors are included in the "employs 4,600" number?  Then, if you look at the top 100 employers in Oakville, you will note Ford at the top with a large majority of the employers next in line being schools, healthcare, government, and consumer-type stores and restaurants.  Companies and entities that exist off of and/or feed the Ford workers.  If Ford closed its doors, many of the other companies would die, although that may take a bit of time.  The tax base would shrink causing tax rates to increase.  Any local companies that feed any goods or services to Ford would be done and leave as well.  Property values would crash within 6-12 months, or sooner.  I say the town would die for all intents and purposes; the question is whether it would be slow or fast.

Probably not, Dan.  Oakville is a close-in suburb of Toronto, and land is in ultra-high demand in metro Toronto.  I would predict that the Oakville plant would be torn down and no longer used for industry, except possibly a gas-fired electric power plant  (that was actually proposed some years back, to the horror of the locals).  The land would be recycled for both housing (most of it) and office parks and, along the main drag, the customary collection of shops and services.  

To respond to your specific questions,  I think the 4,950 Ford listed employees would include at least some of the outside-contract personnel. You are assuming that the workforce actually lives in Oakville now.  That is unlikely.  The auto workers, at the $22 mark, have had stagnant (or even slightly declining) wages since 1980.  Back around 1980 an auto assembly worker in the GM St. Catharines plant was picking up about $50,000/yr., or figure $25/hr.  So nominal dollar wages have not moved much.  Relative wage stagnation tends to point to a stagnant economy.  For that, blame the politicians, who carefully wreck the foundations of industry - cheap water and power, and good transport links. 

My guess is that the bulk of the auto workers have migrated outwards into the cheaper housing of the Outer Rim. So the unemployment aspect will be spread out.  The Town itself will not take that much of a hit, as the land will be rapidly redeveloped, probably into even higher value real estate.  Canada just keeps adding migrants and continues to need more and more housing. 

The auto parts suppliers tend to be in outlier areas, such as London, or Kitchener, or even farther West along the 401 into Windsor.  Plus you have vast numbers of auto parts flowing in from Ohio and New York State, and Tennessee.  While Dana is local, Dana builds shafts and transmissions for lots of vehicles including heavy trucks, so while it may take a bit of a hit, Dana is not going out of business.  Would Dana close the Oakville plant and consolidate in the USA?  It might do that.  Yet another risk.

The big parts builder in Canada is Magna Corp.  I don't see them moving.  The damage to Oakville is a lot less than to say Janesville or, for that matter, the closing of the Chrysler plant in New Castle, Delaware.  Not much other opportunity for those workers. 

Either way, it starts to look like the days of stand-alone Canadian auto plants, specifically for Domestic iron, is headed to the end.  And I place the blame directly on the shoulders of the politicians for that.  

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On 12/3/2018 at 1:07 PM, ThunderBlade said:

If they continue with this intensity, I predict that Ford, GM, and Fiat-Chrysler will all be bankrupt within 5-8 years...

 

On 12/3/2018 at 1:28 PM, Petar said:

Sounds familiar, so close 2008...Some people never learn lessons

GM and Chrysler weren't allowed to go bankrupt in 2008, which means they're still running under the same incompetent management with the same incompetent employees.  In fact, they lost most of their best during the financial instability.  It was inevitable they would lose ground in a competitive market with too many players, and I wouldn't expect them to survive long term.

Ford didn't go bankrupt in 2008, but it was close.  Their retreat from the lowest margin market segments indicates that they can't compete with more competent, foreign automakers.  It will be interesting to see if they can lean down to a core of competent employees and hold their ground on trucks/SUVs. 

Then there's Tesla, Rivian, and other US startups.  My guess is that Republicans are abandoning the Big 3 after Obama bailed them out, expecting that non-union, non-ward-of-the-state companies will fill some of the gap they leave behind.  Even if those startups don't grow, the death of Democratic, unionized automakers will shift more production - and jobs - to conservative states. 

In other words, the Big 3 have become such an expensive, incompetent liability, I don't think anyone will bother propping them up - esp. not with unemployment so low. 

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