Ford may cut 10% of its global workforce
That’s 3,000 jobs as automaker struggles with business plan
DEARBORN, MICH. Ford, saddled with a corporate strategy that has failed to ignite investor confidence, is sending signals to Wall Street that it’s willing to make big changes to adapt to tougher market conditions and is said to be considering a plan to cut its global workforce by 10%.
That news of pending job cuts comes after a busy stretch of days for the Dearborn automaker, which had its annual meeting with shareholders Thursday and met with Wall Street analysts Friday. On Monday, The Wall Street
Journal reported that Ford is poised to announce a plan in the coming days that mostly will target salaried workers.
Pressure is mounting on Ford CEO Mark Fields because he has failed to outline a business plan that has the clarity of his predecessor, Alan Mulally, who steered Ford through the recession with his simple “One Ford” plan, Morgan Stanley analyst Adam Jonas said.
“After a recent breakfast with Ford CEO Mark Fields, we are left with the impression of a company that is not at all satisfied with its share-price performance, aware of the challenges facing the
business and actively pursuing alternative ways to take advantage of opportunities that could narrow the value gap,” Jonas said.
Jonas said Ford appears to be considering major strategic changes, including these:
Scaling back production of cars as consumers continue to gravitate toward crossovers, SUVS and pickups.
Paying down its debt so it has a bigger cash cushion going as the U.S. auto industry heads into a period of slower new-vehicle sales.
Exiting businesses or parts of the world, such as India, where the automaker is underperforming.
Creating new companies or new lines of business so it is better positioned to be a big player in autonomous vehicles and the ride-sharing business. Ford has made big moves in this arena with the creation of Ford Smart Mobility and a commitment to launch a fully autonomous vehicle by 2021, but it may become even more aggressive, Jonas said.
Ford is poised to outline a plan to cut jobs globally as early as this week, according to The Wall
Street Journal. Ford employs about 200,000 employees globally and about 85,000 workers in the United States.
In the U.S., about 30,000 of those workers are salaried and about 55,000 are hourly. That means a job cut plan aimed at 10% of the company’s salaried workers in the U.S. would add up to about 3,000 people.
On Tuesday, Ford officials did not deny The Wall Street Journal report but said the automaker will announce a plan in the coming days.
In a statement, Ford officials emphasized their commitment to “transforming underperforming areas of our core business and investing aggressively, but prudently, in emerging opportunities.”
Analyst Arndt Ellinghorst at Evercore ISI investment bankers said investors likely would welcome a Ford move to cut costs.
“It isn’t clear whether any potential job cuts would be part of the already announced cost savings target of $3 billion for 2017, which is part of Ford’s plan to increase profitability in 2018,” Ellinghorst said.
Executive Chairman Bill Ford told shareholders last week the company isn’t happy with the company’s stock price, which has dropped 17% since January.
“Look, we’re as frustrated as you are by the stock price,” Ford said. “And a couple of people have said, ‘Well, does the Ford family care about the stock price?’
“The short answer is yes, a lot,” Ford said. Much of our — most of our — net worth is tied up in the company.”
Historically, Wall Street doesn’t give automakers much credit for making billions during boom times and fails to see promise in their long-term plans. That dynamic is playing out again, according to Barclays analyst Brian Johnson, who argues Ford’s “unsplashy strategy should be appreciated.”
Ford, as well as General Motors, also recently suffered the embarrassment of 14-year-old Tesla Motors surpassing it in total market value. Founded by serial entrepreneur Elon Musk, Tesla has captured the imagination of Wall Street even as his company continues to lose money. Tesla lost $397.2 million during the first three months of the year while Ford earned a profit of $1.6 billion.
“It’s been a tough go for Ford stock, but hopefully some of its unsplashy actions can lead to better stock performance,” Johnson said.
“We’re as frustrated as you are by the stock price. And a couple of people have said, ‘Well, does the Ford family care about the stock price?’ The short answer is yes, a lot.” Bill Ford, executive chairman, talking to shareholders last week