Ford to sell jets, cut executive pay in return for $9bn lifeline

[SpoolMan]

Troubled car giant Ford is to sell its five corporate jets, pay chief executive Alan Mulally a $1-a-year salary and scrap management bonuses in return for up to $9bn (£6bn) of lifeline funding from the US government.

Ford, which today submitted a detailed business plan to the US Congress in the hope of being granted its share of $25bn alongside General Motors and Chrysler, is planning to undertake drastic changes to its business model.

In a detailed 33-page plan, the 105-year-old car giant revealed that it has asked American politicians for up to $9bn in bridge financing, but stressed that it hopes to be able to make the necessary changes to its business “without accessing the loan.” The plan is predicated on Ford becoming break-even or profitable in its North American division and across the company as a whole in 2011.

If the US Congress agrees to grant Ford a loan, however, and Ford does use it, Mr Mulally has agreed to work for a salary of just $1, in what the plan called “a sign of his confidence in the company’s transformation plan and future.”

The gesture comes just weeks after Mr Mulally, when asked if he would be willing to accept a $1 salary, said: “I think I’m ok where I am.”

The Ford chief has received almost $50m in pay and benefits over the last two years, in addition to $752,000 spent on personal and family use of the corporate jets. In contrast, the company’s chairman, Bill Ford, has not taken a salary for four years.

As a sign that he has listened to lawmakers, Mr Mulally will also drive to Capitol Hill for hearings to be held in both the House and Senate this week, following criticism that the Big Three used private jets to travel to Washington during the last set of hearings in early November.

To emphasise Ford’s green credentials, Mr Mulally will travel to Washington in a Ford Escape Hybrid and a Mercury Mariner.

The business plan is heavily focused on re-engineering Ford to become an environmentally-efficient car manufacturer, spending $14bn in the US on “advanced technologies and products to improve fuel efficiency” over the next seven years.

Ford also said it would next month detail plans to boost the company’s family of hybrid vehicles, including work on a full battery-powered electric vehicle to be on sale by 2010.

The company also plans to cut its dealer base, and has already announced the possible sale of Volvo, the remaining of its European marques following the sale of Jaguar and Land Rover to Tata.

By James Quinn, Wall Street Correspondent

[bob^]

I'd work for a dollar too if my last bonus was around 9 million wasn't it?

[DanielXR8]

Well he is smart. He can grandstand the $1 thing, while getting paid in full. He simply has to ensure Ford does everything needed to keep from drawing on the loan.

Now he can stand next to the GM and Chrysler guys and say "me too" to the $1 salary, while actually pulling in his normal full salary.

Ford needs a guy who can think smart and they might have found it. He has already "turned around" his $1 salary after all!

Interesting news about cutting back dealers too. I can nominate a few here for him to consider and I'll waiver my $1 fee. But seriously, if a few don't fall in the right regions in Aus, it would make sense for Ford Aust to reduce its dealer network. The volume of car sales is making all Ford dealers marginal - time to get rid of a few, so the rest can survive.

[Sprint347]

Good, a shakeup the industry needed... here's hoping all manufacturers survive and end up with quality/technology/prices that rival that of the japanese imports.

[XWGT]

Money where the mouth is...........pleased to see it.

Would have prefered to see one year at $1 as a true goodwill gesture after collecting $50 mill over the last two years...........but hey......I'm a bit of an extremist and I'm happy to admit that :-)

Good luck to the blue oval.......I think there generally ok but the other big two may well drag them down.

[DanielXR8]

I hope everyone read the article carefully, Mullay is not getting paid a dollar unless he spends some of the money from congress he is asking to be put aside for Ford.

Now he doesn't have any plans to at present to spend this money and if GM and Chrysler keep their heads above water, he probably never will. So if all goes well for the big three he will be on full pay, while the other two go on the $1.

In other words "he will be comfortable with it".

A case of look at what I say in the media sound byte, not at what I take home this week.

To be fair, he's only been in the job two years and has been busy cleaning up the mess left behind for him, so I don't really think he deserves less than full pay anyway.

Dan

[AusM]

$1 salary and $10 million in allowances and expense claims perhaps?

I wonder how they figure becoming break-even or profitable by 2011? How much of that is optimism?

[EgoFG]

Originally Posted by PFdesign

$1 salary and $10 million in allowances and expense claims perhaps?

I wonder how they figure becoming break-even or profitable by 2011? How much of that is optimism?

Ah but $1 now is actually less than Lee Iacoca got when he too $1 per year in the early '80s (?) Chrysler problems.
Iacoca's 1$ would have got more than a coffe !

[The Mighty Red]

Originally Posted by PFdesign

$1 salary and $10 million in allowances and expense claims perhaps?

I wonder how they figure becoming break-even or profitable by 2011? How much of that is optimism?

considering no one is buying new cars I'd say its highly optermistic......

no one is worth $50m for 2 years work ,A company is Billions in the red and the CEO is being paid $25m a year, Its Obscene!...The US goverment should of hung them out to dry.

[irlewy86]

Originally Posted by The Mighty Red

considering no one is buying new cars I'd say its highly optermistic......

no one is worth $50m for 2 years work ,A company is Billions in the red and the CEO is being paid $25m a year, Its Obscene!...The US goverment should of hung them out to dry.

Bill Ford earns nothing, the decision to take Alan Mulally and pay him big bucks was made when Ford where in about the same bad situation as today. They want a gaurentee of $9b in the bank to use if the situation demands it, while it seems American Leyland simply wants the money to keep the doors open. Its not suprising that they have asked for a handout just as deserving as the other 2 and shouldn't be left to fend for themselves if American Leyland is given a free kick by way of taxpayer money.

[The G6ET Spot]

It still sounds as though Ford is better placed than GM.

It has been reported that they are going to shed 31,500 jobs and close down certain brands of it's (so called) empire.

They have also said that without a grant of US$12 billion from the US government that they could be broke as early as January next year.

It certainly looks like interesting times ahead

[Rodp]

Originally Posted by The Mighty Red

considering no one is buying new cars I'd say its highly optermistic......

no one is worth $50m for 2 years work ,A company is Billions in the red and the CEO is being paid $25m a year, Its Obscene!...The US goverment should of hung them out to dry.

New cars are still being bought, that has only declined a fraction. Ford need to position themselves in the segments they are being bought. I'm puzzled as to why the Focus and Fiesta don't sell better than they do...

Philisophically, I'd agree that no-one is worth $25m per year to work, show me a leader of a country who earns that much (legally) but when you get vapid morons like Tom Cruise or David Beckham making that sort of money in a matter of weeks, a man responsible for millions of jobs globally has to be compensated fairly, so I don't begrudge him making those sorts of dollars.

[phillyc]

Originally Posted by Rodp

Philisophically, I'd agree that no-one is worth $25m per year to work, show me a leader of a country who earns that much (legally) but when you get vapid morons like Tom Cruise or David Beckham making that sort of money in a matter of weeks, a man responsible for millions of jobs globally has to be compensated fairly, so I don't begrudge him making those sorts of dollars.

Very valid point Rodp. But then again I also think the big entertainers get too much too. Still these executives work alot harder.

Alan Mullaly is making the right decisions and has been doing so since he was hired. Cutting back on trucks, moving towards cars, moving towards the one Ford. He is the right man for the job.

The great Ford ship is in great hands.

[Rodp]

Originally Posted by phillyc

Very valid point Rodp. But then again I also think the big entertainers get too much too.

Don't get me started... the salaries of those vapid morons who call Hollywood their home irritate me no end. The reason a family has to pay ~$100 for a family of 4 for a movie, drinks and popcorn is because we pay these tools millions for mollycoddling them through several weeks of stressful and world saving work. :\

[The Mighty Red]

Originally Posted by Rodp

New cars are still being bought, that has only declined a fraction.

new car sales were down 11.7% in october and I read somewhere earlier that November sales are down 17% , which is a huge amount....and it is only going to get worse.....

[Rodp]

Originally Posted by The Mighty Red

new car sales were down 11.7% in october and I read somewhere earlier that November sales are down 17% , which is a huge amount....and it is only going to get worse.....

Only time will tell..

[Bossxr8]

Originally Posted by The Mighty Red

considering no one is buying new cars I'd say its highly optermistic......

no one is worth $50m for 2 years work ,A company is Billions in the red and the CEO is being paid $25m a year, Its Obscene!...The US goverment should of hung them out to dry.

Ford were targeting to be profitable in 2009, and they were ahead of schedule by being in the black for the first quarter of 08 before the credit crunch hit and stuffed it all up, so once the credit crisis is over I don't think they will have a problem being profitable by 2011, they would have been there anyway before the big blowup.

I don't see why Mullally shouldn't be paid what he gets, they were in debt before he got there and has done a brilliant job of starting to turn it around. Once the credit crisis is over he will finish the restructuring job. He deserves every cent he gets.

[Rodp]

I don't know how happy I would be to work for a company who's CEO has made that statement. Working in a large IT company and seeing everything cut to the bone by a CEO who's making a mint, one can only imagine the sort of cuts that are planned to make Ford appear profitable.

According to the company I work for, regardless of 10% growth and record quarters 5 quarters in a row, I won't be getting a bonus this financial, I won't be getting a pay rise for the 5th consecutive year and Christmas no longer exists...

I pity Ford's future employees.

[DanielXR8]

On a side note, I wonder if a Ford jet "clunks" when taxing, surging of the motors when cold, rust in the tail and bad vibrations when braking or do they all do that? ;)

Dan

[Bossxr8]

Originally Posted by DanielXR8

On a side note, I wonder if a Ford jet "clunks" when taxing, surging of the motors when cold, rust in the tail and bad vibrations when braking or do they all do that? ;)

Dan

They own them, they don't make them.