Ford Motor Co. yesterday said that it would lay off about 10% of its salaried workforce — a total of about 15,000 white-collar jobs with about 9,600 of them based in the U.S., 1,000 in Mexico, 600 in Canada and 4,141 in the Asia Pacific region. The cuts will include employees working in communications, corporate staffing, finance, government affairs, marketing, purchasing and sales.
The product development and Ford Credit, information technology, and global data and analytics teams, all of which are based in Dearborn, Mich., will not be affected, Ian Thibodeau reports for The Detroit News. “Ford said it will use early retirement and separation packages” to reach its numbers, he writes.
“The move comes as Ford targets $3 billion in cost reductions for 2017, a plan intended to improve profitability in 2018 even as U.S. auto sales plateau,” the Wall Street Journal’s Christina Rogers wrote Monday in a story that anticipated the official statement emailed to reporters yesterday. “Ford’s share price has suffered during Mr. Fields’s three-year tenure, and the company’s market value has slipped far behind those of Tesla Inc. and General Motors Co.”
On Tuesday, Reuters’ David Shepardson and Nick Carey wrote that a source had informed them “the cuts are part of a previously announced plan to slash costs by $3 billion … as U.S. new vehicles auto sales have shown signs of decline after seven years of consecutive growth since the end of the Great Recession.”
Not to mention the disruption of self-driving cars (albeit mostly in theory at this point).
“Blessed with the best-selling vehicle in the U.S., the enormously profitable F-series pickup truck, which would be a Fortune 500 company on its own, Ford remains endowed with strong financials. But investors are anxious for signs that the company is positioned to capitalize on the revolution in autonomous vehicles that's expected to sweep through the auto industry over the next decade,” points out Brent Snavely for the Detroit Free Press.
“While very difficult for the employees themselves, this trimming of the workforce by Ford is unfortunately a necessary evil in an industry that is contracting, even at a very high level, and facing fierce competition from outside forces,” Kelley Blue Book executive analyst Rebecca Lindland tells Snavely.
“I think Ford is in a tough spot. There’s no one or two silver bullets that will make the stock rally,” ” Morningstar analyst David Whiston tells the New York Times’ Bill Vlasic and Neal E. Boudette, who report that its share price has fallen 40% since Fields took over three years ago and 10% since Jan. 1.
“Cutting costs while investing in advanced technology is, indeed, a difficult balancing act,” they observe. “Ford is trimming salaried employees, G.M. is cutting production shifts at some factories and Fiat Chrysler has idled plants that make passenger cars. Automakers have also increased discounts to move bulging inventories of unsold models.”
“Some of Ford's problems are of its own making,” the Associated Press points out in a story in the Los Angeles Times. “Morgan Stanley analyst Adam Jonas said Ford should consider exiting unprofitable vehicle lines, such as small cars, or markets, such as India.
“Ford's U.S. sales are down in part because the automaker doesn't have offerings in popular segments like subcompact SUVs and midsize pickups. And Ford hasn't kept up with rivals in the electric car market. GM's Chevrolet Bolt electric car, with more than 200 miles of range, went on sale last year; Ford is working on an electric SUV with 300 miles of range, but it’s not due out until 2020,” according to the AP.
The roughly 57,000 members of the United Auto Workers union who work at Ford will not be affected by the cuts, CNN Money’s Chris Isidore points outs.
“Ford won praise from [President Donald] Trump when it announced in early January that it was scrapping plans for a plant in Mexico and would invest $700 million in a Michigan plant to build electric and self-driving cars,” he continues.
“But the company is moving ahead with plans announced last year to shift all small car production to Mexico. Plans for the next Mexican plant were dropped because of lower demand for small cars altogether. The small cars that were to be built there will be built at another Mexican plant.”
As far as who will be jettisoned from the offices and cubicles around the world, “this has to be done surgically rather than randomly or otherwise you lose the talent you need the most,” industry consultant Maryann Keller toldBloomberg Technology’s Keith Naughton when the rumor was breaking earlier this week.
But anyway you cut it, 10% is a big chuck of brainpower.