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Free Market Project

2/18/2006 7:15:40 PM

Updated 01/25/06

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Newscasts Overlook Ford’s Costly Severance Programs
Searching for reasons behind layoffs, reporters skip $140 million paid yearly to former employees.

By Ken Shepherd
Free Market Project
Jan. 24, 2006

Send this page to a friend! (click here)     The January 23 editions of the network newscasts led with layoffs at Ford Motor Company (NYSE: F), detailing the number of jobs to be lost and the plants slated for closing, showcasing the reactions of Ford employees. Journalists blamed lagging sales and the prices of steel and oil for Ford’s troubles. Yet none of the networks balanced its reporting with a mention of Ford’s costly severance packages, including a 25-year-old “jobs bank” program and an alternative plan which pays out $15,000-per-year in tuition assistance.

     ABC’s Dean Reynolds assessed the automaker’s financial woes on “World News Tonight”: “Ford was whipsawed by rising oil and steel prices that came at the same time customers lost interest in the SUVs the company was still pushing … its inability to adjust to changing American tastes put it at a competitive disadvantage.”

     But that’s not the end of the story, thanks to union-driven benefits that have been costing the company millions.

     Jobs banks have been around for a quarter century, started in 1984 at the behest of the United Auto Workers union to help laid-off workers. Detroit Free Press reporter Michael Ellis noted in a January 24 article that Ford’s version of the program, “the Guaranteed Employment Numbers or GEN … provides a safety net for workers during a downturn.”

     Ellis cited a Ford spokeswoman reporting that “wages and benefits paid annually to hourly workers average about $130,000” per person, which Ellis calculated would run Ford around $140 million per year to fund GEN.

     In lieu of the traditional but costly jobs bank program, Ford is also offering workers an alternative plan which covers tuition assistance. The January 23 Atlanta Journal-Constitution explained that “Ford will pay up to $15,000 a year, directly to the institutions the workers attend.” In addition, former employees “will receive an annual stipend equal to about half what they were making at Ford, excluding overtime. Medical coverage for the former employee and his or her family will continue during the process.”

     While none of the evening newscasts reported these details, ABC’s Mellody Hobson  mentioned the automaker’s severance plans in her January 24 online finance column, which featured advice for recovering from a job layoff.

     Also missing from network reporting was the fact that despite recent layoffs by Ford and General Motors Corp., the auto industry is in America is still vibrant, thanks to foreign companies opening plants in the United States. Micheline Maynard reported in the January 24 New York Times that manufacturing expert James Womack estimates there are 1.1 million Americans employed in auto manufacturing, including manufacturing parts like engines and transmissions. Maynard added that foreign companies employ about 60,000 and are growing, with companies like Toyota and Nissan opening new plants or expanding operations in states like Texas and Mississippi.


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