Ford unveils turnaround plan
Automaker promises to sell corporate jet and cut CEO pay to $1 if it borrows from the government but offers few additional cost cutting plans.
Last Updated: December 2, 2008: 1:26 PM ET

Motor became the first of the three U.S. automakers to unveil its turnaround plans to Congress Tuesday, but the plan contained little in the way of new cost cuts or other changes beyond what the company had previously announced.

The company announced that the salary of Ford CEO Alan Mulally would be cut to $1 a year if Ford (F, Fortune 500) actually borrowed money from the government. When Mulally appeared before the House Financial Services Committee last month, he did not agree to the suggestion of such a paycut.

A spokesman for General Motors (GM, Fortune 500) confirmed to CNN that CEO Rick Wagoner also will accept a $1 salary. Other details of GM's turnaround plan were not immediately available. Chrysler LLC CEO Robert Nardelli agreed during Congressional testimony last month he would also agree to a $1 salary in return for federal help.

Mulally had a base salary of $2 million and total compensation of $21.7 million last year, according to the company's filings. Wagoner received base pay of $1.6 million and total compensation of $14.4 million. Closely-held Chrysler does not disclose executive pay.

Ford and GM also announced plans to get rid of corporate jets. Mulally, Wagoner and Nardelli were all roundly criticized at a House hearing last month when they admitted they had each flown their corporate jets to Washington to ask for help.

Ford said it will sell its five corporate jets. GM said it plans to sell four of its seven jets and is exploring plans to transfer leases on the other three to another operator.

Mulally and Wagoner will be driving to Washington in hybrid vehicles made by their companies when they return to Capitol Hill later this week to make their case for loans. Nardelli is also not planning to fly to Washington but Chrysler has not disclosed any more specifics of his travel plans.

Executives from the Big Three automakers have been seeking $25 billion in federal loans as a result of the economic crisis and tumbling auto sales. Tuesday is the deadline for the Big Three automakers to present their turnaround plans to Congress.

GM and Chrysler have argued that they could run out of cash next year if they don't get a bailout from the government. But Ford repeated its previous statement that it believes it can return to profitability without help from Congress and that it is seeking the assistance more as a backstop.

Ford plan lacks some key details
Ford said that, as a result of its turnaround plan, it believes its core North American auto operations will be breakeven or profitable in 2011 on a pre-tax basis. The company had previously set a goal of returning those operations to profitability next year but dropped that target in May without giving a new one.

Ford also said it expects industrywide sales of 12.5 million vehicles in 2009, 14.5 million vehicles in 2010 and 15.5 million vehicles in 2011. By way of comparison, U.S. auto sales averaged close to 17 million a year from 1998 through 2006.

The company made commitments to speed up the introduction of hybrid and electric vehicles, and added that it believes the consumer shift away from light trucks towards more fuel efficient vehicles is permanent.

And Ford pledged to reverse the decades-long trend of losing money on the production of small cars in the United States. The company said it would increase the production of smaller vehicles such as the Ford Focus to more than 1 million a year and reduce the complexity of the car's parts in order to reduce costs.

Still, the Ford plan is perhaps most notable for what it did not include. The company did not mention that it would be dropping any brand or unprofitable models, beyond Monday's announcement that Ford again looking at possibly selling Volvo. Ford had previously sold the Jaguar, Aston-Martin and Land Rover brands and sold a controlling interest in Mazda last month.

There was also no announcement of additional plants being closed or capacity being eliminated. Ford said it continues to work with its unions and dealers to achieve additional savings, but it did not set any cost savings targets for those discussions.

Ford highlighted many of the cuts it has already made, including closing 14 plants and reducing salaried personnel by 36% over the past three years. The company also touted labor cost savings that would bring the cost of factory workers' pay and benefits close to those of the nonunion U.S. plants operated by Asian automakers.

Ford spokesman Mike Moran said that the lack of new cost cutting plans is a reflection of the work that has been done to cut costs at Ford in recent years, especially since Mulally became CEO in 2006.

Ford shares gained more the 10% in late-morning trading Tuesday following the release of its plan.

First Published: December 2, 2008: 10:35 AM ET

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