Ford Motor Co. is preparing an array of severance packages -- including a $100,000 one-time payout -- for workers whose plants are slated to close as part of the automaker's massive new restructuring plan, according to company officials.

Workers from Wixom to St. Louis to Atlanta have been anxiously awaiting details of the incentive packages since Ford announced last month it will close 14 plants and cut 30,000 hourly jobs over the next six years.

While the company expects to achieve half of the job cuts through attrition, the packages are needed to encourage the rest to leave the company voluntarily, said Marty Mulloy, Ford's vice president of labor affairs.

Ford will offer eligible workers these options:


A special $100,000 buyout offer for those who agree to leave the company and forgo all benefits except pension benefits they have accrued.


An Educational Opportunity Program to help workers move into a new career. The program provides workers with at least one year of seniority with up to $15,000 a year for tuition to an accredited school of their choice for up to four years. Those workers will receive full medical benefits and half their regular pay while they attend school.


Two early retirement programs. The first is for workers 55 and older who have 30 or more years with the company. They will receive a $35,000 check and begin retirement immediately, with full retirement benefits. The other program is for workers 50 and older with 10 or more years at the company. They will be provided a fixed level of income for life, though not as much as they would receive through the regular retirement program. The amount will vary from individual to individual, Mulloy said.


Finally, a special pre-retirement leave program for workers with 28 years of service but not yet 30 years. Ford will allow those workers to take a leave -- where they will receive 85 percent of their pay -- until they reach 30 years of service.

Ford has announced plans to idle assembly plants in Wixom, Atlanta and St. Louis, along with a transmission factory in Batavia, Ohio, and a casting plant in Windsor. Ford says it will add two more assembly plants to that list by the end of the year.

"As difficult as these plant actions are, we want to try to minimize the impact on employees in so far as we can," Mulloy said.

The company is already meeting with the UAW to discuss the severance programs, but they will have to be approved by each of the affected locals, he said. All four programs will be available to workers at each of the idled plants if they are approved by the union, Mulloy said.

Ford has already been contacted by a number of schools that are interested in the educational program, and the company is planning to allow some to set up information booths at the plants slated for closure. The company expects this to be an attractive option for younger workers. "A lot of them are using it to start their own businesses," Mulloy said.

Employees make plans

Ford already offers the packages to its workers, now in jobs banks, from the idled Edison, N.J., and Loraine, Ohio, plants. The company expects to start offering the severance programs soon to workers at the St. Louis factory, which is scheduled to shut down by the end of March.

"We have to have a formal agreement in St. Louis," Mulloy said. "We're very close."

St. Louis worker Brant McNeal is not waiting to find out the details.

The McNeal, 40, started working at the Ford plant in 1990. He is not eligible for any of the retirement packages and says that -- after taxes -- the $100,000 would leave him with a lot less than he would earn in another year on the Ford payroll.

"$100,000 isn't enough. I was amazed at how many people say they might take it," McNeal said. "I've still got a contract. I'm going to let them honor it."

Ford's labor agreement with the UAW states that Ford cannot permanently lay off workers without pay. While those assigned to idled factories may be eligible for unemployment, Ford must make up most of the difference between what that pays and their regular wages.

In addition, the company must continue to pay for the spectrum of benefits UAW members enjoy.

Once unemployment insurance runs out, workers are assigned to Ford's jobs bank, where they continue to draw full wages and benefits -- at least until the current contract expires in 2007.

In the meantime, McNeal is hard at work fixing up the duplex he lives in so that he can rent it out, along with a home he owns next door. When he is finished with his remodeling work, McNeal plans to borrow against these properties and buy more. He thinks he can make a living as a landlord.

"I'm optimistic, but I'm also doing something about it," he said.

Wixom workers in shock

Jack Dobbyn is doing something about it, too. Like other Ford workers, the Wixom worker is putting his house up for sale.

A week before Ford announced the details of its North American restructuring plan, Dobbyn's wife found a lump in her breast. Already worried about the fate of his plant, he turned to God with a simple prayer: "Take my job, not my wife."

Dobbyn's wife turned out to be fine, but his plant is slated to close next year. So, Dobbyn is putting his house on the market. If he can sell it, Dobbyn figures he can get rid of his mortgage and buy a more modest home outright with the profit. The only problem is that a lot of other Ford workers in his Livonia neighborhood seem to have the same idea.

"It's going to eliminate a house payment. That's going to make it a lot easier to live," Dobbyn said, adding that it might let him consider the tuition option.

"That's an exceptional idea. (But) I don't think I could survive on half my income," said the 48-year-old. Dobbyn would like to do something with computers, but anything that does not involve cars looks pretty good to him right now. "I want to start doing something and get out of this industry."

Wixom is not slated to shutdown until the second quarter of 2007, so workers like Dobbyn will have to wait a little longer for their severance options. Until then, he will stay in Wixom's jobs bank, since his services are no longer needed on the assembly line.

"I would like to go out right now and get a job, for the security, but I'm making good money and get good benefits," Dobbyn said. "I've got two daughters in college. I can't sacrifice their education, that's for sure. I want them to have more than I've got. I want them to be out of the auto industry."

NEW YORK -- Junk ratings are proving costly to Ford Motor Credit Co. as the finance arm of No. 2 U.S. automaker Ford Motor Co. exchanges debt coming due over the next two and a half years.

Ford Motor Credit Co. is offering yields of about 10.6 percent on $1.5 billion of new notes due in 2010 that it wants to exchange for notes coming due through January 2009.

The yield is the highest paid by Ford Credit in at least a decade, according to financial data provider Dealogic. Borrowing costs are the largest expense for Ford Credit, which has about $131 billion of debt.

A Ford Motor Credit spokeswoman declined to comment on the private exchange offer.

"All they're trying to do is roll this debt and extend it in exchange for increased flexibility in the short run, and they're willing to pay a very high price to do that," said Morgan Keegan analyst Pete Hastings.

The terms of the exchange offer, announced late on Thursday, came on the same day that Standard & Poor's threatened to lower its credit ratings on Ford and Ford Credit deeper into junk status amid concerns about Ford's shrinking market share and high commodity costs.

Ford and Ford Credit are now rated "BB-minus" by S&P, three steps below investment grade.

Ford earlier this month said its global market share will likely be down or flat this year, citing the impact of rising fuel prices and competition on sales of full-size trucks and sport utility vehicles, its traditional areas of strength.

By accepting the exchange offer, investors will be exposed to Ford's credit risks for a longer time, including the 2007 union contract negotiations, Hastings said. Ford is aiming to reduce jobs and lower benefits, and it is unclear whether that process will go smoothly or lead to a cash-draining strike, he said.

Despite the high yields, Ford may ultimately benefit from the exchange, said Thomas Eggenschwiler, co-director of research for Aladdin Capital in Stamford, Connecticut. The debt exchange will allow Ford Credit to conserve liquidity and also relieve any investor worries about upcoming debt maturities, he said.

The 2010 notes are one of two series of notes being issued as part of the exchange. It will also include about $1 billion of floating-rate notes due in June 2011 to be priced at par.

NEW YORK (Reuters) -- Fitch Ratings on Thursday cut its issuer default ratings on Ford Motor Co. and its finance unit deeper into junk territory, citing an expectation of persistent deterioration in the automaker's revenue through at least 2006.

Ford's revenue is flagging "due to continued market share losses, deteriorating (product) mix, price competition, a lack of key product introductions, coupled with lack of tangible progress in reducing its cost structure," Fitch said in a statement.

"The downgrade is not unexpected," said Brad Rubin, senior credit analyst at BNP Paribas in New York.

Ford is suffering from revenue cash burn, poor products, and competitive disadvantages, he said.

In the credit derivative market, five-year credit default swaps on Ford widened around 12 basis points to about 891 basis points, or $891,000 per year to insure $10 million in debt. Ford Motor Credit Co.'s swap spreads were around 3 basis points wider at 509 basis points.

Despite an aggressive spending plan to reduce its fixed cost structure, persistently high commodity prices and financial and operational stresses at Ford's supply base are likely to more than offset any progress in 2006, and Ford is unlikely to see little relief over the near term, Fitch said.

"The unfavorable trend of revenues and key cost factors is expected to result in accelerated negative cash flows through 2006 and into 2007," Fitch said.

Fitch lowered Ford's issuer default rating two notches to "B-plus," four levels below investment grade, from "BB," and its senior unsecured debt one notch to "BB-minus," three levels below investment grade, from "BB."

Ford Motor Credit Co.'s issuer default rating was cut two notches to "B-plus," from "BB," though the unit's senior unsecured debt was unchanged at "BB." Ford Motor Credit is Ford's finance arm.

The outlook is negative, indicating an additional cut is likely over the next one to two years.

Fitch considers Ford and Ford Motor Credit to be linked for ratings purposes. However, the relatively higher rating on Ford Motor Credit's senior unsecured debt reflects higher recovery expectations for the unit, Fitch analyst Mark Oline said on Thursday in a conference call.

Fitch has assigned Ford a recovery rating of "RR3," indicating the company's bonds would be likely to recover 50 percent to 70 percent of their principal in the event the automaker files for bankruptcy.

Ford Motor Credit Co. has been awarded an "RR2" recovery rating, indicating recovery prospects of 70 percent to 90 percent, Fitch said.

Moody's Investors Service and Standard & Poor's both have Ford's debt on review for downgrade from "Ba3" and "BB-minus," respectively, both three steps below investment grade.

Ford today reported a net loss of 7 cents per share, or $123 million, for the second quarter of 2006. This compares with net profit of 47 cents per share, or $946 million, in the second quarter of 2005. Ford's second-quarter loss from continuing operations, excluding special items, was 3 cents per share, or $48 million, compared with a profit of 47 cents per share, or $936 million, in the same period a year ago. Ford's second-quarter total sales and revenue was $42 billion, down $2.5 billion from a year ago. In the second quarter, Ford's North America automotive operations reported a pre-tax loss of $797 million, compared with a pre-tax loss of $907 million a year ago. The improvement is more than explained by cost reductions in most areas of the business, partially offset by a mix shift from trucks to passenger cars, higher incentives and adverse foreign currency exchange. Sales were $19.2 billion, down from $19.9 billion for the same period a year ago.

Executive Vice President and Chief Financial Officer Don Leclair said, "Although we've made progress on a number of fronts, clearly we have more to do. This includes maintaining our focus on improving our quality, reducing our costs and maintaining our strong liquidity as we respond to the tougher operating environment we face."

"We've seen an improvement in North America results in the second quarter, but the external factors we face aren't going to get any easier," said Chairman and Chief Executive Officer Bill Ford. "Mark Fields (executive vice president and president - The Americas) and his team have been working on plans to accelerate their efforts. Within the next 60 days, we'll be in a position to discuss the additional actions we will be taking."

PAG reported a pre-tax loss of $162 million for the second quarter, compared with a pre-tax profit of $17 million for the same period in 2005. The decline is more than explained by the impact of the expiration of favorable hedges that were put in place in previous years, adjustments to warranty accruals for prior models, and lower market share at Volvo in advance of new model introductions. These factors were partially offset by favorable product and market mix, driven largely by the success of new products at Land Rover, Jaguar and Aston Martin. Second-quarter sales for PAG were $7.8 billion, compared with $7.9 billion a year ago.

North America third-quarter production is projected at 670,000 units, down 58,000 units on a year-over-year basis, and 40,000 units less than what was previously announced. This change from the prior level is more than explained by lower truck production, reflecting our intention to maintain appropriate dealer inventory levels. Ford Europe production is projected at 410,000 units, up 38,000 units from last year, primarily reflecting the timing of vacation shutdowns. PAG production is projected at 150,000 units, down 3,000 units from last year.

Compared with July 2005, most Ford products experienced sharp declines and overall sales declined 35.7 percent. In a statement today, Ford was, nonetheless, upbeat. "We had a solid retail month in July," said Al Giombetti, president, Ford and Lincoln Mercury sales and marketing. "We are particularly encouraged by the response to our new cars, which offer distinctive styling and outstanding fuel economy. They are definitely the right products at the right time." Retail sales for the Ford Fusion, Mercury Milan, and Lincoln Zephyr were up 18 percent over last month. The Mustang and Ford GT were the only models to post actual sales increases over July 2005. Volvo sales were down 10 percent, Jaguar was off 15 percent, Lincoln was down 21.5 percent, Mercury fell 34.1 percent, and Land Rover — on of Ford's stronger brands — was also down considerably: 30.6 percent.