Ford will cut 1,400 white-collar jobs in North America and Asia Pacific
The move comes as the carmaker faces slowing U.S. sales and disgruntled investors.
Ford Motor Co. is getting leaner as it faces an onslaught of challenges, including slowing U.S. sales, high-tech challengers and its own disgruntled shareholders.
The 114-year-old automaker said Wednesday that it is cutting 1,400 nonfactory jobs in North America and the Asia Pacific region. The company will offer voluntary early retirement and separation packages to about 10% of its salaried workers in departments such as sales, marketing and human resources. It expects the actions to be complete by the end of September.
The cuts are the biggest to Ford’s U.S. white-collar staff since 2007, when 7,200 workers took voluntary buyout packages.
In an email to employees, Ford said it wants to strengthen its core business and invest aggressively in new opportunities. “Reducing costs and becoming as lean and efficient as possible also remain part of that work,” the company said.
Ford isn’t the only automaker looking to slim down. Last month, General Motors Co. Chief Financial Officer Chuck Stevens said GM was considering cutting its white-collar staff to rein in costs.
After seven straight years of growth, U.S. auto sales are starting to slow down, which will hurt automakers’ profits. Sales in Asia are volatile and not as profitable. Turbulence in other markets, such as South America, hasn’t helped.
Automakers are also investing heavily in self-driving cars and other new technology. Ford, which has promised an autonomous vehicle by 2021, bought a shuttle service and invested $1 billion in Argo AI, an artificial intelligence start-up. Such investments may not pay dividends for years, but automakers can’t risk being left behind by nontraditional rivals such as Waymo and Uber.
But some of Ford’s problems are of its own making. 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.
Ford also recently embarked on an expensive, 10year plan to remake its Dearborn, Mich., campus.
Ford’s early-retirement and separation offers will be open to about 15,300 workers, including 9,600 in the U.S., 1,000 in Mexico, 600 in Canada and 4,141 in Asia. The company said it will release more details to employees in June.
Certain areas of the business won’t be targeted, including Ford’s product development and credit divisions. Factory workers and white-collar employees in Ford’s plants won’t be affected. Ford also isn’t likely to cut jobs in its emerging businesses, such as its research center in Palo Alto. Ford said in August that it planned to double its Palo Alto staff, which would mean hiring more than 100 researchers and engineers.
Jonas said he was impressed with Ford’s decisive action to cut jobs, but he still thinks Ford stock is overvalued. He has a $10 price target on the shares.
Ford’s shares fell 18 cents, or 1.6%, to $10.76 on Wednesday.
Ford’s stock price has fallen nearly 40% in the three years since Mark Fields became chief executive. The automaker’s executive chairman, Bill Ford, told investors at the company’s annual meeting last week that he’s as unhappy about the decline as they are.
“We’re frustrated, but our business is performing well. We’re making investments for both today and tomorrow, and I believe that’s the right thing to do,” he said.
Barclay’s analyst Brian Johnson, who has a $15 target on the shares, said Ford’s stock has suffered because the company isn’t making splashy moves, like GM’s investment in Lyft or Fiat Chrysler’s tie-up with Waymo, which is owned by Google’s parent company, Alphabet Inc.
But Johnson said Ford has a solid strategy and is making quiet moves that could pay off, such as introducing a plug-in hybrid commercial vehicle in Europe.