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Ford may announce massive job cuts

Ford Motor Company is expected to announce plans to cut 25,000 jobs and several plants on Monday.

india Updated: Jan 22, 2006 10:42 IST

Ford Motor Company is expected to announce plans to cut 25,000 jobs and several plants on Monday but analysts are warning the move will not be sufficient to allow the automaker to return its struggling American unit to profitability.

"The near-term savings are not going to be as much as it needs to be," Brian Ropp, an auto analyst with T Rowe Price in Baltimore, Maryland, said.

"What it does is keep them from producing cars they don't need and they won't have to discount the cars as much."

The savings from job cuts are limited by the peculiarity of the automaker's contract with its main union. Hourly employees who don't take early retirement packages enter the jobs bank retraining program in which they collect full pay and benefits while waiting for a spot to open up on the assembly line.

Cutting production levels also won't help Ford stabilize its steadily declining market share. In the past ten years, Ford has seen its share of the massive US market drop from 26.4 to 17.4 per cent, the lowest level since the 1920's.

While Ford has managed to overcome the quality problem which dogged sales in the 1990's, it has still not been able to come up with small cars that excite consumers.

The world's third largest automaker did manage to boost overall sales in the 1990's with the introduction of sports utility vehicles but its market share in that highly profitable segment soon began to wane as Japanese rivals introduced smaller, car-based crossover sports utility vehicles.

First Published: Jan 22, 2006 10:42 IST