Two-year breath of fresh air for St. Paul plant

Jul 25, 2008 (Star Tribune - McClatchy-Tribune Information Services via COMTEX) -- F | Quote | Chart | News | PowerRating -- Ford's tumbling financial fortunes proved improbably good news for the 1,060 people who still turn out Ranger pickups at the company's St. Paul assembly plant.

On Thursday, the same day that it reported a whopping quarterly loss of $8.7 billion, Ford Motor Co. announced that it would delay closure of the plant by two years, until 2011.

To believe that the plant will survive beyond this latest forecast requires trust that the U.S. economy will turn from to cold to hot, that pioneering technology will move from promise to reality and that a near-bankrupt automobile company will come up with hundreds of millions of new investment dollars.

But, for the moment, many Ford workers felt they won a long shot.

"We didn't give up trying to keep it longer," said Roger Terveen, president of United Automobile Workers Local 879, with 900 members at the Ranger plant on a bank of the Mississippi.

"We went for the gold and they decided they liked what they saw," Terveen said. "It's a major milestone for us, maybe bittersweet for some."

Bittersweet because about 1,600 workers at the plant took buyouts, believing that it would close next year.

"There are people who picked up and moved their families to California or Kansas City, thinking the plant was going to close," said Benjamin Gross, a $29-an-hour assembly line worker with 11 years on the job.

Linda Siedschlag of North St. Paul had mixed feelings about Thursday's announcement. After 20 years on the job, Siedschlag, 54, took an early pension two years ago when Ford said that it planned to close the St. Paul plant in 2009. But her husband, George, still works at the plant, a 21-year veteran.

Some regrets, lots of relief

"I would have liked to stay. I wouldn't have taken a buyout if I knew it was staying open until 2011," Siedschlag said. "I've had a few phone calls from others today saying the same thing."

But for many, Thursday was a day of relief.

"We're extremely happy, of course," Terveen said. "I think we've proved ... we make money for Ford Motor Company."

Others, outside the plant, agreed.

"We're very, very pleased it will stay open until 2011," Gov. Tim Pawlenty said.

"Hopefully, this will give us breathing space to keep it open even longer."

Pawlenty, Sen. Norm Coleman, R-Minn., and a bevy of city and state officials have visited Ford headquarters in recent years to lobby for the plant to stay open.

"There's hope and opportunity for a longer-term tomorrow," Coleman said. "I want to celebrate the fact that we've got at least two more years."

Pawlenty said state officials have told Ford officials that some state financial assistance would likely be available to help the company. And some legislators on Thursday already were talking about offering taxpayer dollars to keep the plant humming beyond 2011 -- even though public subsidies had nothing to do with the company's decision to keep running the Ranger assembly line.

"This decision gives us a little breathing room to address the long-term viability of the plant," said Rep. Frank Hornstein, DFL-Minneapolis, chairman of the Minnesota House Transportation and Transit Policy Subcommittee.

"We must act decisively on a package of incentives that enables Ford to produce the kind of fuel-efficient vehicles in St. Paul that will keep the plant thriving now and in the future," Hornstein said. "We have been in conversations with Ford and we are confident that we can work together toward both short- and long-term solutions to keep jobs in St. Paul."

So far, Ford has only indicated an interest in short-term incentives, Hornstein said. "They would like to see something similar to what exists in Kentucky and Michigan, which is kind of a payroll tax deferral," he explained.

The state has not developed a target number for such incentives, Hornstein said, but he added that he hopes to have one soon based on a complex formula that involves the number of employees at the plant and the size of its payroll.

Although the state was ready to offer incentives, Ford's decision to keep the Ranger plant open came without a deal, said Dan McElroy, commissioner of the Minnesota Department of Employment and Economic Development.

Credit where credit due

"Whenever things go wrong, the question is who do you blame? When things go right, who do you credit?" McElroy said.

"The real credit goes to the market," he said. "This truck is selling better, while other trucks are selling horribly."

The market is a fickle banker, however. The fortunes of Ford and the auto industry keep changing. Sales of sport-utility vehicles and full-size pickups are down, thanks to $4-a-gallon gasoline and a slow economy.

Sales of Ford's popular F-series truck are down 22.7 percent for the first six months of this year compared with the first half of last year.

The Ranger, a more fuel-efficient, cheaper alternative to its larger siblings, saw a slight uptick in sales this year, followed by a bad stumble in June that brought first-half sales down 3.9 percent over the first six months of last year.

"What happens beyond 2011 really is dependent on the status of the company then, sales figures and the cost competitiveness of the St. Paul plant," said Mark Warnsman, an auto industry analyst at the New York office of brokerage firm Calyon Securities.

While Ford officials may be tempted to eventually sell the St. Paul plant to real estate developers, Warnsman said he doubts that the value of the land would play a determining role in the factory's future.

Thursday's announcement was Ford's third update to its "Way Forward" plan to salvage its sales amid consumers' renewed interest in fuel-efficient vehicles.

It's part of the automaker's new emphasis on staying nimble in the face of changing circumstances, said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

The earlier announcement to close the St. Paul plant was based on its distance from the supply chain, its potentially valuable property and the Ranger "growing very long in the tooth," Cole said.

"But that decision was pre-energy shock," he added. "This is the only plant that builds the Ranger at a time when smaller is better.

"All this says is, based on the current environment, they see a need for the plant for several more years," Cole said. "It doesn't mean it will go away at that point, or that it will live forever."

Good news on local front

In the meantime, it's good news for the local economy, because every job in the assembly plant creates nine more in the community, he said.

The reprieve came as no surprise to Fred Zimmerman, a retired University of St. Thomas manufacturing professor.

The plant produces a durable, fuel-efficient truck that continues to have a place in times of high energy costs, Zimmerman said. St. Paul has long been one of Ford's best plants, he said, with one exception: It lacks integrated metal stamping, which means big parts such as hoods and doors must be shipped in.

The truck's sustained popularity has meant no redesigns for about 15 years, and it's time to give the public something fresh, Zimmerman said. A hybrid engine is one possibility, and well suited to the stop-and-go driving of delivery trucks, for example. But hybrid components are expensive, and Zimmerman said an easier adaptation for the plant would be to high-efficiency diesel engines.

"What happens here in St. Paul is going to be a function of what they put in the redesign of the Ranger," Zimmerman said.

That, of course, assuming that Ford wants to redesign the Ranger at all.

Star Tribune staff writer Bob Von Sternberg contributed to this report. meyers@startribune.com --612-673-1746 --hcummins@startribune.com --612-673-4671 --lanelson@startribune.com --612-673-4758

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