Ford Philippines Says Layoff Options Open
Ford Group Philippines Inc. (FGPI) will ride a road eerie with uncertainties, so much so that its president said if the car industry further goes downhill, the local subsidiary of the Dearborn, Michigan-based vehicle-maker may shed off further its current 700 employees.
“If the industry continues to decline, we may revisit that option,” FGPI president Richard C. Baker said in a recent press briefing. However, the Ford executive was quick to add that “based on our outlook, there are no plans.”
As things are still unfolding, he said, “We’re closely monitoring the market.”
Baker spoke to reporters on the eve of a US jobless rate announcement of 7.2 percent, its highest for 16 years, as the United States further showed signs of deepening recession.FGPI shed 29 jobs last year, Baker said, as part of the company’s plan to undertake a 15-percent cut in fixed costs.
“We want to avoid redundancy. The Philippines shouldn’t be doing what our plant in Thailand is doing,” Baker said. Ford Motor Co. maintains two plants in these countries as nerve centers for its Asean operations.
Two hundred of its total employees are office-based; where the “separation package” was approved, according to Baker.
Labor forms the other half of fixed costs in car manufacturing; the other half being steel and other raw materials.
Cutting labor—and shedding these fast—may help some companies save cash, now a valuable weapon as credit windows are being shut.
Baker later told the BusinessMirror they are not seeing costs in raw materials, especially in steel, increasing in the next six months.
“So far, prices of commodities like steel have been declining. There are no indications it would rise in the near future or impact on our costs.”
Prices of steel, a major component of vehicles, is currently priced at $560 per short ton or pst (0.9 metric ton) in the world market.
Forecasts by the United Bank of Switzerland and Standard Chartered Bank analysts on the Bloomberg terminal, however, see the price rising to $800 pst from a low SCB-forecast of $735 pst in the first quarter of this year.
Baker said there are also no indications their suppliers for parts and components will renege on their contracts to the company. “There are no indications that they’re having problems,” Baker replied when asked if their local parts and components suppliers are feeling the impact of the US economic recession.
Baker pointed to banks as key to enhancing the car industry’s ability to maneuver in these trying times. He said they have been receiving reports that car loan approvals have been declining. “That could prove to be difficult because 80 percent of buyers finance their purchase with borrowings.”
Local banks are expected to report car and consumer loan approvals next month.
Baker said the company remains “cautiously optimistic,” expecting flat sales growth this year.
“We’re maintaining our position,” Baker said, noting that FGPI was still able to sell last year a total of 3,844 units of Ford Focus, Ford Escape, Mazda3, and Mazda Tribute manufactured locally. Total export, mainly to Thailand, was at 7,208 units.
Baker said their outlook remains “conservative” despite the “rosy” picture he painted on the Philippine economy, which is posting “relative macroeconomic strength.”
Their “cautious optimism” is based on the low oil-price regime, declining nonperforming loans—“which means consumers are paying their bills”— steady remittances of overseas Filipino workers and fairly high consumer confidence levels. Still, he added, “No one can predict what will happen next.” (With research by Louise Francisco)
Baker expects the industry to show some decline in the first half of this year “not because of the Philippine economic performance but of global proportions.”
Since 2002, FGPI has exported about 58,000 completely built units (CBU) as of end-December 2008, Baker said.
CBU models rolled out from the company”s Santa Rosa, Laguna plant are two Ford models and two Mazda models at annual volumes of between 10,000 to 11,000 units. These are shipped via Manila ports to Asean-member countries such as Indonesia, Malaysia, Thailand and Vietnam.
Baker said an expansion of the road to the Batangas port could enhance the efficiency of their export processes since the southern port is nearer.
The company also imports the Ford Ranger, Ford Everest and a Mazda model from Thailand.
“We sell more imports than domestically produced,” Baker said, adding that the current combination—of exports being higher than domestic sales—will be maintained.
Thailand will also be the source of the company’s first small car to be sold in the Philippines in the latter part of this year, according to Baker.
Next month, the company is expected to launch the 2009 Ford Club Wagon model.
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