Ford, GM slash budgets
DETROIT (AP) – Ford Motor Co. is intensifying efforts to slash its $30 billion budget for costs not directly related to vehicles, and General Motors Corp. is digging deeper to reduce expenses as the world’s two largest automakers adjust to sluggish sales and rising competition. GM, the industry’s biggest manufacturer, has asked departments to eliminate costs such as nonessential travel and, in some cases, to trim budgets more than what was expected at the start of the year, spokeswoman Toni Simonetti said.
At No. 2 Ford, the automaker is working to reduce its nonproduct expenses – in marketing, sales and service and information technology, for example – by as much as 20 percent over the next two years.
Ford spokeswoman Marcey Evans said the effort is part of the automaker’s ongoing revitalization plan and its goal to improve profits by $9 billion by mid-decade.
Ford already has trimmed $2.2 billion in so-called nonproduct spending in the past year or so, “and we’ve been talking since January that we need to accelerate our cost-cutting,” Evans said.
“It’s not necessarily about numbers,” she said. “It’s about strategy.”
Ford, which has lost $6.4 billion in the past two years, is under increasing pressure from investors to speed up its turnaround plan at a time when the war with Iraq and a sluggish economy have slowed the U.S. auto market.
And costs continue to rise. Ford, for example, boosted its average vehicle incentive to $2,827 last month, 4 percent higher than February, according to Credit Suisse First Boston. At the same time, the automaker’s sales fell 5 percent.
Still, Ford is sticking with its forecast to post earnings of about $1.2 billion, or 70 cents a share, for the year and increase its market share. Top company officials have maintained the revitalization plan launched in January 2002 is on track.
Ford reports first quarter financial results April 16.
In a research report last week, Goldman Sachs & Co. analyst Gary Lapidus said he expected Ford to beat Wall Street estimates of 21 cents a share for the first quarter but questioned whether the company could meet its year-end target.
At GM, after sales fell 19 percent in February, “we did take a hard look and say, “Let’s step up some cost reduction,”‘ Simonetti said.
“It’s an extremely competitive environment,” she said. “Volume is down.”
GM’s sales fell 3.3 percent in March, a month in which its average vehicle incentive fell 5.5 percent to $2,915.
GM has beefed up its offerings in April.
Chief executive Rick Wagoner said earlier this year the company planned to cut its white-collar work force by 3 percent to 7 percent in 2003. Through attrition and buyout agreements, GM has eliminated 10,755 such jobs in the past two years.
Simonetti said there were no specific goals in the latest push to reduce costs.
“I think the mandate is dig deep and see where you’ve got unnecessary costs and try to take that out of your budget,” she said.
GM reports first-quarter financial results April 15.
In afternoon trading Monday on the New York Stock Exchange, GM shares were up 50 cents, or 1.4 percent, to $35.40, while Ford shares rose 11 cents, or 1.4 percent, to $8.
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On the Net:
Ford Motor Co., http://www.ford.com/
General Motors Corp., http://www.gm.com/