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Ford's recovery includes long-term HR investment in short-term business unit

July 18, 2006
Related Topics: Career Development, Employee Career Development, Retention, Featured Article

Keeping employees engaged is a challenge for most managers. But for the executives at Automotive Components Holdings, a temporary business that was created solely to sell off its 17 unprofitable plants, it's critical.

    In 2000, Ford Motor Co. spun off its auto parts supplier Visteon as a separate company. But last year, to prevent Visteon from filing for bankruptcy, Ford bought back 17 of its plants and six other facilities in the U.S. and Mexico. The plants operate under the new name Automotive Components Holdings. The task for the company management, which is composed of Ford and Visteon executives, is to make the plants profitable and attractive to potential buyers.

    Since October, ACH has closed two plants and transferred another two back to Ford. The company has announced it will close one more plant by year's end. Now ACH is focused on selling the remainder of its facilities.

    The company's success is not only crucial to its 10,500 hourly and 3,700 salaried employees; it's also key for Ford's turnaround strategy. The company is the automaker's main supplier.

    For that reason, closing all of the plants is not an option, analysts say. Despite the enormity of the task at hand, Deb Forester, organizational development manager and operations effectiveness manager, says she was thrilled when Al Ver, chief operating officer of ACH, called her to join the leadership team.

    "It's not just about selling off the facilities," she says. "It's the opportunity to impact 25,000 families and create a supply base that is more efficient and effective for Ford."

    Ford's approach to Visteon is a stark contrast to how General Motors is addressing the financial struggles facing Delphi, its former auto parts supplier. While Ford is working to make the Visteon plants profitable in hopes of selling them, GM is fighting efforts to force it to take back its former Delphi plants.

    Observers, however, note that while Ford's approach may be kinder to workers, it remains to be seen whether it's the more effective strategy in turning around the business.

    "They are taking a humane approach and giving employees time, but that doesn't mean that, ultimately, Ford won't have to buy out more employees," says Maryann Keller, an auto industry analyst.

Setting up a strategy
   In August 2004, Forester and 12 other executives were pulled off their current jobs at Ford and Visteon to start working on a strategy for ACH.

    The executives, who came from various divisions at Ford such as finance, communications and human resources, relocated to a building in Dearborn, Michigan, and met for two to three hours three times a week to establish a strategy for ACH. The company began operations October 1, 2005.

    "The first thing the group wanted to do was to make sure that everyone understood clearly the vision of where we wanted to go so that everything went smoothly," Forester says. "The task was not going to be easy, but we wanted to be sure it was well understood."

    At the outset, the group articulated the company's mission. It would give Ford "the ability to obtain competitively priced, high-quality parts and systems by preparing its business units for sale or other disposition."

    Some employees complained about the statement, calling it demoralizing, says Della DiPietro, a spokeswoman and member of the company's leadership team.

    "I could appreciate their angst that the mission statement was all about selling the business, but it forced employees to come to grips with that reality," she says. "It also showed that this leadership team had the integrity to be very clear with what we were about."

    The team also developed four key metrics to gauge its success in reaching this goal: quality, cost, on-time delivery of parts and progress toward the sale of the facilities.

    To motivate employees, ACH introduced an incentive program. Every worker receives an annual bonus based on the company's success in improving in those four categories, DiPietro says. She declined to say how much an employee could receive in annual bonus pay.

    Incentive pay is one way the company seeks to keep workers engaged, but a bigger focus for ACH is helping workers improve their skills, Forester says.

    "For us, this is a way of showing employees that we meant it when we told them we want them to be successful," she says.

    ACH conducted a benchmarking study of other automotive companies' skill needs and training programs to make sure the training it was providing would make the company more attractive to buyers.

    "We looked at the skill base at other companies and if there was something that we could incorporate into our training that we hadn't thought of," Forester says. "All of those things went into our training and development curriculum."

    By teaming up with local colleges and vendors, ACH provides training to any employee who wants it. The leadership team has met with supervisors and asked them what their staffs need. The company has conducted 4,200 classes and has 1,200 requests for more classes. One hundred employees are taking nine-month certification courses in technical specialties.

    For employees who just want a refresher course, ACH is enlisting senior employees to offer insights or tips to their peers. Some of these classes have nothing to do with technical training or day-to-day jobs, Forester says. For example, some employees are offering yoga classes, while others are giving pointers on financial planning, she says. By offering these classes, ACH hopes to improve morale and productivity, Forester says.

Employee uncertainty
The biggest challenge for ACH executives is communicating with employees when they don't know what the future holds, DiPietro says.

    Given the temporary nature of the company, ACH can't rely on traditional methods of communications, like monthly newsletters, she says. DiPietro and her team had to come up with timely and effective ways to get information to all of ACH's employees. When the company began operations in October, ACH decided to hold town hall meetings.

    "We had not been able to talk with employees who were assigned to ACH until October 1, so there was a huge cry for information, but no one could talk," DiPietro says. In the first week of October, the management team visited each of the ACH facilities to explain the situation and answer questions. Since Ver couldn't get to each facility within the first week, the ACH leadership team decided to allow other top management executives to conduct the employee meetings, DiPietro says.

    "That was a tradeoff we made because we thought that timeliness was more important," she says.

    Ver continues to have monthly meetings for his salaried workers, and ACH is considering doing another meeting for hourly workers this year, DiPietro says. Since the company can't afford to take its hourly workers off the floor for town hall meetings, it tries to communicate to them in other ways.

    DiPietro and her team created templates for different types of e-mails that it could send to salaried workers and could also post on the bulletin boards for hourly employees.

    "Each notice has a different masthead so that people can recognize the topic just from how they look," DiPietro says.

    For example, the "Ask Al" bulletin provides answers to employees' questions. "Making the Grade" provides workers with a report card of how the company is doing, as measured by its four metrics.

    The company had resisted launching a Web site because of the costs and permanency associated with it, but in response to employee demand it did put up a password-protected Web page that contains documents that employees might need, DiPietro says. The site features policies and procedures, but not company news. The Web page in many ways symbolizes the fine line that ACH has to walk with its employees.

    "We are a transition team, so we don't want to do anything that suggests permanency," DiPietro says. "But we also want to be responsive to our employees' needs."

Challenges remain
As a result of its efforts, ACH has seen 5 to 10 percent improvement in its quality, delivery and costs during its first eight months of operations, DiPietro says. It also has been contacted by 100 parties interested in acquiring plants, she says.

    Despite this, retaining workers remains a challenge. The company won't comment on turnover statistics, but DiPietro says that turnover is "higher than we would like."

    Even putting the workforce management issues aside, analysts are skeptical about who will buy the facilities. Whoever buys any of the plants would have to want Ford's business. But given Ford's falling market share, there is a higher risk of taking that business on, they say.

    But ACH's efforts in keeping its workers and training them to be more marketable may work in Ford's favor in the long run, analysts say. Just by taking the humane approach, ACH might create goodwill that will facilitate a sale, says Arthur Wheaton, a workplace and industry education specialist at Cornell University.

    "Whoever buys those plants is stuck with the union," he says. By making an effort to keep employees' jobs, it might make buyers more comfortable with bringing on union workers. wƒmMore online Training to engage young workers: 

Workforce Management, July 17, 2006, p. 46 -- Subscribe Now!

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