Ford announced it’s cutting some 7,000 jobs to offset large investments needed to transition to production of electric and autonomous cars.
While significant, the slimming will only hit white-collar workers and is focused largely outside the United States. It’s also more conservative than some predicted.
Out of the planned layoffs and voluntary buyouts, 4,700 will be abroad. Within the United States, some 1,500 workers already left voluntarily or took buyouts, about 300 have been laid off, and some 500 will still be let go, largely in and around the company’s headquarters in Dearborn, Michigan, just outside Detroit.
Morgan Stanley analyst Adam Jonas predicted in late 2018 that 25,000 white-collar jobs would be cut, and Ford declined to confirm or deny the number at the time.
The company said the cuts are focused on reducing bureaucracy by thinning the white-collar workforce by 10 percent, including a near-20 percent cut in upper management. Apart from expected savings of some $600 million a year, the company will increase the worker-per-manager count to seven from five, and flatten the company structure from 14 to nine layers or less by the end of the year, Chief Executive Jim Hackett said in a May 20 memo to employees.
“To succeed in our competitive industry, and position Ford to win in a fast-charging future, we must reduce bureaucracy, empower managers, speed decision-making and focus on the most valuable work, and cost cuts,” he said.
In July 2018, Ford announced the restructuring would cost $7 billion in cash and hit pretax earnings by $11 billion during the next three to five years.
Factory workers haven’t been affected by the restructuring thus far, as the company has retooled car plants so they can build more popular trucks and SUVs.
The layoffs are coming across a broad swath of the company, including engineering, product development, marketing, information technology, logistics, finance, and other areas. But the company also said it is hiring in some critical areas including those developing software and dealing with self-driving and electric vehicles.
Hackett said in the memo that Ford is departing from past practices, and will let laid-off employees stay a few days to wrap up their jobs and say goodbye to colleagues. In the past, laid-off workers had to pack up and leave immediately.
“Ford is a family company and saying goodbye to colleagues is difficult and emotional,” Hackett wrote.
Job Cuts in Russia, Europe
Ford said in March it will stop making passenger cars in Russia by the end of June, closing vehicle assembly plants in St. Petersburg and Naberezhnye Chelny, as well as an engine plant in Yelabuga, noting “significant employee separations are required.”
In February, the company announced its exit from the heavy truck business in South America. In January, Ford Europe announced restructuring, including cutting thousands of jobs, considering plant closures, and discontinuing loss-making vehicle lines with the goal of a 6 percent operating margin on the Old Continent.
In April, Ford announced a $500 million minority investment in Rivian, an electric vehicle startup that unveiled its 750-horsepower electric truck and SUV at the 2018 Los Angeles Auto Show.
“In addition to the investment, the companies have agreed to work together to develop an all-new, next-generation battery electric vehicle for Ford’s growing EV portfolio using Rivian’s skateboard platform,” Ford said in a release.
Ford already has confirmed two electric vehicles: a Mustang-inspired crossover coming in 2020 and an electric version of the popular F-150 pickup.
The automaker also has signed a deal with Germany’s Volkswagen AG to join forces on commercial vans and pickup trucks. The companies are also negotiating a broader alliance for electric and self-driving vehicle development.
The second-largest U.S.-based automaker (behind General Motors), Ford employs almost 200,000 people worldwide and about 100,000 in the United States.
Ford’s profit fell 34 percent in the first quarter, but was better than expected, given the hit from restructuring costs, The Detroit News reported. Ford stock rallied on the news in late April by some 10 percent and has largely remained level since.
The Associated Press and Reuters contributed to this report.