Ford contractors feel ax

Automaker imposes 7% cut in pay for outside labor November 6, 2001

BY JEFFREY MCCRACKEN DETROIT FREE PRESS BUSINESS WRITER

Ford Motor Co., as part of its massive companywide cost-cutting, is slashing what it pays contract-labor firms by 7 percent, a move that will jeopardize the jobs or reduce the pay of thousands of engineers, designers, computer specialists and others who work at the automaker but aren't Ford employees.

The 7-percent, across-the-board cut in what Ford pays these firms, such as IBM and Auburn Hills-based MSX International Inc., will be effective Nov. 19. It could save Ford tens of millions of dollars.

Ford uses between 6,000 and 7,000 contract workers to do everything from design parts to program computers. Contract workers handle large amounts of Ford's engineering and information technology work. For example, up to 60 percent of its 5,000-person IT group is employed by outside companies.

Most of Ford's contract workers are employed in metro Detroit and have worked years at Ford offices.

Because Ford left it up to the contracting firms how to account for the 7-percent rate reduction, the Ford plan could mean different things for the contract workers, sometimes called agency employees. Some firms will likely lay off their workers, while others may just cut wages by 7 percent. One agency memo obtained by the Free Press says contract workers will lose paid vacations and holidays this year.

The firms will also likely have to swallow some of the rate cut in lower profits.

The contractor rate cut fits into the broad restructuring in the works at Ford. The automaker has promised to announce all the details of the restructuring in the next few weeks, but "Ford is not waiting until then to chop away at costs," said a Ford executive who asked to remain anonymous.

Troy-based Modern Engineering Inc., a large contract-engineering and technical-services firm, sent its employees a memo saying it will balance the Ford rate cut by eliminating paid vacations and holidays for the rest of the year. The memo added that Modern did not know "when or if these changes will be reversed."

Modern Engineering executives did not return three phone calls Monday.

Ford, faced with its third straight unprofitable quarter and lower sales, is looking to cut billions of dollars in spending. The automaker has already announced a 10-percent buyout of white-collar workers, a move that will eliminate 4,000-5,000 jobs. Ford has also eliminated bonuses for its top 6,000 executives, a move that will save $442 million based on last year's bonuses.

The cut was announced to the contract firms in late October via PeopleNet, the contract-labor administration service that MSX supplies for Ford.

Last week, Ford ousted its president and chief executive officer, Jacques Nasser, and replaced him with Chairman William Clay Ford Jr., great-grandson of founder Henry Ford. Ford Jr. and incoming chief operating officer Nick Scheele are overseeing the restructuring, which could result in even more job cuts at Ford. Wall Street auto analysts and Ford insiders have told the Free Press up to 20,000 jobs -- 8,000 white collar and 12,000 blue collar -- could be cut.

Ford spokeswoman Della DiPietro said Ford hoped the 7-percent rate cut would not cause firms to slash jobs, but the automaker had to make the move because economic conditions at Ford are not good. The automaker has lost more than $1.4 billion the last two quarters and is expected to lose money again this quarter.

"It's a rate reduction between us and them, not necessarily a headcount reduction. We want to preserve as many jobs as possible, but in this economic environment we need to reduce costs," she said.

DiPietro said the rate cut would cover all agencies that supply workers to Ford. Ford has cut its workforce and become more reliant on firms like Modern Engineering to supply it with designers and engineers. Contract workers are considered less-expensive employees and are easier to let go.

The various firms affected declined to comment on the rate cut. An executive at one of the firms, who asked to remain anonymous, said the cut was "a sensitive issue," because on short notice they have to decide if they will handle the Ford edict by laying off workers, cutting pay or some other measure.

Contact JEFFREY McCRACKEN at 313-222-8763 or mccracken@freepress.com.

http://www.auto.com/industry/ford6_20011106.htm

-- Martin Thompson (mthom1927@aol.com), November 06, 2001