Ford Motor Company has decided to axe health insurance benefits to its Medicare-eligible retirees over 65, from January 2008 and to withhold pay raises to its salaried workers next year, as a part of its continuing efforts to cut costs. All major American automakers are struggling to stay profitable, after losing their market shares to their Japanese counterparts. Ford has reported a loss of $7.24 billion in the first nine months of the year and is working on various means and ways to cut costs and to restructure its business. General Motors and Daimler Chrysler have already announced plans to cut health benefits to their employees, as a part of their cost-reduction drive.

Increasing employee costs are affecting the profitability of American automakers, in spite of the fact that they are witnessing substantial growth in their sales, in the recent past. Ford is planning to reduce its salaried workforce in US by 10,000 workers from its current level of 25,000 to 30,000 workers, through early or voluntary retirement offers. The company is also planning to reduce its blue-collared employees, through job cuts, in an effort to prune its workforce inline with the actual market demand for its products. However, the company will provide $1,800 to its retirees to buy supplemental health insurance plans.

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