Ford cuts 1,400 jobs to boost profits
Ford Motor Co. said Wednesday that it would cut 10 percent of its salaried jobs in North America and Asia as part of a cost-saving move aimed at increasing sagging profits and propping up its stock price.
The news comes less than a week after CEO Mark Fields faced criticism at the automaker’s annual shareholder meeting for its lagging performance.
The cutbacks, totaling 1,400 positions, are part of an effort aimed at “reducing costs and becoming as lean and efficient as possible,” the company said in a message to employees.
Automakers are being challenged by slowing U.S. sales after seven years of steady growth. Ford’s sales slipped 5.6 percent in the first four months of 2017.
Ford said it expected the job reductions announced Wednesday to be complete by the end of September, primarily through early retirement offers and other financial incentives.
It said factory jobs would be unaffected.
The company’s operations in Europe and South America are also excluded because they have already undergone cutbacks, the company said.
“We remain focused on the three strategic priorities that will create value and drive profitable growth, which include fortifying the profit pillars in our core business, transforming traditionally underperforming areas of our core business and investing aggressively, but prudently, in emerging opportunities,” the automaker said.
When it announced quarterly earnings last month, Ford said it would achieve $3 billion in cost efficiencies in the current year, mostly offsetting the cost of investments in those “emerging opportunities,” an allusion to technologies like driverless and electric vehicles and ride-hailing services.
Ford had $1.6 billion in net income in the first quarter, a 35 percent drop from the year-ago period. Its stock has declined about 40 percent since Fields was named chief executive three years ago, and almost 10 percent since Jan. 1, even as the overall market has risen.
Fields has made significant spending commitments as part of a bid to shed the Rust Belt image of auto manufacturing and reposition Ford as a forward-looking “mobility company.”
Among the initiatives is a plan to create a sprawling, high-tech headquarters campus in Dearborn, Mich., of energy-efficient buildings that will be linked by selfdriving vehicles. The project is expected to take 10 years to complete and is estimated to cost at least $1 billion.
Ford also pledged to invest $1 billion over the next five years in the software company Argo AI, which the automaker is counting on to develop artificial intelligence technology that will serve as the brains of future autonomous vehicles. Ford invested smaller sums in other startups working on digital maps, machine vision and cloud computing — all technologies that may pay off in the future but add little to its current vehicles.
Those investments are intended to help Fields reach an ambitious goal. Last summer, speaking at Ford’s research center in Silicon Valley, he vowed that the company would begin mass producing a self-driving car — with no steering wheel and no pedals — by 2021.
Ford said positions in information technology would be unaffected by the job reductions announced Wednesday.
David Whiston, a financial analyst at Morningstar, said he thought that Fields was correct in investing in autonomous technology and mobility services like ride-hailing.
“I think Ford is in a tough spot,” he said. “They have to invest for the future, and the earnings they are generating are quite good.”
Last year Ford reported $4.6 billion in net income — which would have been considered an outstanding achievement a decade ago.
“But at the same time, there’s not much they can do right now,” Whiston said. “The market is at its peak. There’s no one or two silver bullets that will make the stock rally.”
For most of this decade, Ford has looked like a better-run company that its larger rival, General Motors. As auto sales recovered after the financial crisis, Ford generally posted healthier profits in North America. While GM was bogged down in the ignition-switch recall and scandal, Ford was introducing an F-150 pickup truck featuring an aluminum body and underpinnings, and an array of hybrid cars. Overseas, Ford gained ground on GM in China, and its European operations began generating profits as GM’s Opel division continued piling up losses in most quarters.
A year ago, in the first quarter of 2016, Ford reported net income of $2.45 billion, about a half a billion more than GM. In North America, Ford made about $3,600 in operating profit on every car and truck it produced — roughly $700 more than GM.
But since then, Ford’s performance has waned. One move that now looks like a misstep was its decision to try to offer only its full-size aluminum truck to pickup buyers. GM added compact models to complement the larger ones that go head-to-head with the F-150, a decision that is paying off now as low gas prices are enticing Americans to buy more trucks. Last year GM sold almost 950,000 pickups, about 100,000 more than Ford.
Ford is now scrambling to reintroduce its compact Ranger pickup, a vehicle it stopped selling in the United States in 2012. The new, redesigned Ranger won’t arrive for another two years, however.