Ford Cuts 10% Of Its Global Salaried Workforce

by Kim Boateng Posted on May 20th, 2019

US car giant Ford is eliminating about 7,000 white-collar jobs — or about 10% of its salaried workforce — as part of a previously announced companywide global restructuring.

About 800 U.S. workers will lose their jobs between now and August. Some workers are being laid off, while others are being reassigned, Ford says.

It says the company’s management team is shrinking by close to 20% as part of the restructuring, which will save Ford about $600 million a year.

In a letter to employees, Ford CEO Jim Hackett said the restructuring is reducing bureaucracy and making Ford “flatter” — meaning most teams have no more than nine layers of management, rather than up to 14.

He acknowledged saying goodbye to colleagues is “difficult and emotional.”

“We have moved away from past practices in some regions where team members who were separated had to leave immediately with their belongings, instead giving people the choice to stay for a few days to wrap up and say goodbye,” he wrote.

Ford’s massive restructuring, expected to cost about $11 billion, is designed to cut costs dramatically. The company has seen profits slump, and while its North American operations continue to make money — thanks largely to the wildly popular F-150 pickup — Ford’s operations overseas are struggling.

Hackett has promised that the “organizational redesign” currently underway will turn the company around.

Ford’s struggles

Ford faces pressure to improve its profitability. Its profit margin has lagged those of some competitors. It has announced the costs of commodities it buys, such as steel and aluminum, have increased about $1 billion annually after tariffs were imposed on those products, even though it sources most of those raw materials from domestic mills. But its executives have said the effort to reshape the business is part of a longer term strategy and not a response to those increased costs.

Because of its restructuring efforts Ford’s stock is up by about a third so far this year, though its was slightly lower in morning trading on the news. Still, that’s more a reflection of how low Ford shares were coming into the year.

Ford’s market value of $41 billion is only slightly higher than that of Tesla (TSLA), an automaker a fraction of its size that has rarely posted a profit. And it’s worth about 40% less than Uber (UBER), which only recently went public and has yet to report a profit.

But Ford and the rest of the auto industry is facing a lot of pressure to prepare itself for the future. The major automakers all have to buy into new technology and plan for a world full of self-driving cars and customers who would rather buy rides than autos themselves. They also face competition from tech companies that are also interested in the market, like Tesla and Alphabet’s (GOOGL) Waymo.

“It’s Ford today. It was GM. All the automakers are looking to do this,” said Michelle Krebs, senior analyst with Cox Automotive. “Everyone cut to the bone during the great recession, then they beefed up since then. They have to figure out how do you wring more money out of today’s business to free up money for future business. The problem is we don’t know when that future business will pay off.”

Krebs said automakers are also preparing for a possible slowdown in auto sales and a possible slowing US economy. Ford sold 237,000 fewer cars and trucks globally in the first quarter, a drop of 14%. It has essentially dropped the traditional sedan from its US product lineup.

Ford is playing catch-up with other automakers, which are further along in their ambitions for electric and self-driving vehicles. It does not currently offer any battery-only electric vehicles, because it halted production of the electric Focus when it discontinued production of the gas version of that vehicle. It lags some other automakers in the race to bring self-driving vehicles to the market, though like other automakers it does have test versions of those vehicles on the road.

So Ford is looking to make new alliances as it restructures its business. It’s teamed with Volkwagen to develop new products, and recently announced a $500 million investment in Rivian, which plans to debut an electric truck next year.

Other big auto companies are also looking toward the future. GM, for example, has brought in millions in investment by setting up a separate unit known as Cruise to focus on self-driving cars. GM has also sold stakes to Softbank and Honda. Ford has said it’s looking at possible outside investors in its electric and self-driving car unit as well.

Leave a Reply