Ford Motor's Buyout Program

Ford Motor Co. will make its white-collar workers an unprecedented buyout offer in September that could trim the automaker's salaried ranks by as much as 10 percent.

The offer -- which analysts say could be made to more than 5,000 of Ford's 53,000 salaried employees -- differs from the typical corporate buyout, in which managers dole out cash or other incentives to persuade employees to voluntarily resign or retire early.

Ford's unique "separation program" will focus solely on salaried workers labeled by Ford executives as "low performers" or "average/solid performers with limited potential."

Employees cannot nominate themselves for buyouts. The novel approach ensures that Ford won't lose its best and brightest workers, avoiding one of the biggest pitfalls of large-scale buyout programs.

The program might be the first widely distributed buyout program in the auto industry based so heavily on merit. It might also serve as a model for other automakers and large corporations to use.

Auto industry analyst Jim Kelleher of Argus Research in New York called Ford's approach bold.

Ford's buyouts will come as the Big Three car companies face tremendous pressure from Wall Street and foreign competitors to slash costs and increase worker productivity. All of Detroit's automakers have reduced their white-collar ranks in the past decade, but analysts say they need to trim even more in the 21st Century.

Experts and executives within General Motors Corp. have been preaching that the No. 1 automaker must trim 50,000 blue-collar workers and simultaneously reduce its white-collar workforce. In fact, the size of GM's future workforce is a pivotal issue in the 41-day UAW strike against the automaker. And Chrysler Corp., despite its status as the leanest automaker in the world, has maintained white-collar hiring freezes in various departments for the past year.

But only Ford has created a workforce reduction program with such sweep and urgency. The program stresses swiftness uncharacteristic of the domestic auto industry: Top human resource executives determined the program's details in June; employees are expected to receive offers in September; and the company aims to purge workers by Dec. 31.

Previous Ford buyout programs were limited primarily to employees in the upper echelons of middle management. But the new program stretches down to the lowest levels of white-collar employees -- even mail deliverers and secretaries.

In Ford lingo, the program stretches from employees classified as "grade one" all the way up to "grade 16" and top executives whose salaries are determined by the board of directors.

Employees who receive the offers are free to refuse them, but they will face consequences: According to internal Ford documents, "future merits/bonuses will be limited" if employees refuse the buyouts.

Ford spokesperson Francine Romine-MacBride said the program affects every level of Ford's white-collar workforce.

"We've been committed to improving quality and reducing costs in every aspect, including the size and structure of our white-collar workforce," Romine-MacBride said.

Employees who may be eligible for special retirement-buyout packages include those age 50 or older who have contributed to the pension plan for at least 10 years, or those age 65 with at least one year of pension contribution.

Other buyout offers have no age restrictions.

The offers may include up to 12 months' "separation allowance" and insurance benefits, a two-year paid lease on a used Ford vehicle, retraining or relocation money, cash bonuses, profit-sharing privileges and other perks. Employment experts say those offers are generous, especially when compared with other corporate buyout or termination programs.

Terms of the buyouts also are generous considering the target employees -- those branded as mediocre or poor. At many companies, such employees are often forced to resign without compensation or benefits.

About 500,000 Americans get downsized each year, estimated John Challenger of the Chicago-based outplacement firm Challenger, Gray & Christmas, and few get separation allowances.

"The downsizing affects people's lives cruelly, no doubt," Challenger said. "But the world is changing, and the car companies in Detroit are now facing competition all over the world ...This country is incredibly oriented toward productivity, and this is a company that's trying to find the people who are not productive -- the bottom performers."

The program also reflects cost-cutting tactics of Jacques (Jac) Nasser, president of Ford Automotive Operations. Nasser preaches constantly about improving Ford's bottom line and stock price. "Shareholder value" has become a company buzzword.

"A lot of the easy cost savings have been achieved, and now Ford is making the tough decisions," said automotive analyst David Healy of New York-based Burnham Securities. "Jac the Knife strikes again."

Rachel Konrad can be reached through E-mail at konrad@det-freepress.com or at 1-313-222-5394.