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Ford CEO Jim Hackett is implementing his plan to improve the Dearborn, Michigan-based automaker's profitability.

Ford Motor Co. will today notify 500 white-collar workers in its North American operations that their jobs are being eliminated, the move part of a broader cutback that will see 7,000 salaried positions eliminated worldwide, including 1,500 former employees who voluntarily separated from the company in 2018.

While most of the focus is on Europe and other markets where Ford has been struggling, as many as 800 U.S. workers could lose their jobs before the end of this year. Coming to about 10% of the automaker’s white-collar workforce, the cutbacks are part of a broader, $11.5 billion global “Smart Redesign” that Ford CEO Jim Hackett announced last year.

“Within that total, and consistent with our goal to reduce bureaucracy, we will have reduced management structure by close to 20%,” CEO Hackett said in a note sent to employees late Monday. “This will result in annual savings of about $600 million.”

(“You want to be there” when the EV market takes off, Hackett tells shareholders. Click Here for the story.)

The cuts come at a critical time for Ford, the automaker struggling to manage a series of major changes:

  • It is trying to push weak and money-losing operations in Europe, Latin America and other markets back into the black;
  • It is largely abandoning the conventional sedan and coupe market, especially in the U.S., in order to focus on more profitable, SUVs, CUVs and other light trucks;
  • It is accelerating its push into electrification, autonomy and mobility services;
  • It is forming a string of new alliances with manufacturing including Germany’s Volkswagen, India’s Mahindra & Mahindra, and suburban-Detroit start-up Rivian.

The second-largest of the Detroit-based automakers also is putting an emphasis on flattening out a bloated bureaucracy that has slowed these efforts and added to the company’s costs.

RJ Scaringe, Rivian founder and CEO, and Ford Executive Chairman Bill Ford are all smiles after Ford Motor Co.'s $500 million investment in Rivian.

These moves have been announced, or significantly accelerated, since Hackett was named CEO two years ago this month, following a management shake-up that saw former Chief Executive Mark Fields ousted.

The Smart Redesign program unveiled last year aims to reduce costs by $11 billion, but Ford had already announced in 2017 a target of trimming $25.5 billion from its operating costs.

“Even as we conclude Smart Redesign, we still have a lot of work to do in the coming months,” Hackett said in the note e-mailed to employees on Monday. “We will continue to work collaboratively and respectfully with our teams and other partners to ensure our designs are effective and fit and that our employees are treated fairly and with respect.”

(Click Here for the details about Ford’s earnings decline.)

In a conversation with earlier this year, Joe Hinrichs, the new president of Ford’s automotive operations, said that one of the key moves the automaker is making will eliminate layers of management. This, he said, was “critical” if Ford hopes to begin making decisions – and bringing new products to market – at the pace of some of its leanest competitors. That includes new entrants into the field such as Tesla and Rivian – Ford last month announcing it would invest $500 million into the start-up.

Joe Hinrichs, Ford president of Auto Operations, said the plan requires the elimination of several layers of management.

Hinrichs stressed during that interview that Ford has empowered team members to find the best way to streamline its operations. In the note sent yesterday to employees, Hackett said that the effort to flatten out the organization is already taking shape. He noted that when he first was named CEO the automaker had 14 layers of management. That is expected to be down to nine “or less” by August. Meanwhile, managers will go from an average five direct reports to seven.

In the first year after he was appointed chief executive, analysts – as well as some company insiders – raised questions about where Hackett was leading Ford. But, in recent months, his strategy has become clearer, and gained more support. The Smart Redesign program and other projects have gained traction on the stock market, Ford shares rising from just $7.65 on Dec. 31, to a closing high for the year of $10.45 set on April 30. Ford stock has been see-sawing since word of the job cuts got out on Tuesday, shares at $10.22 at noon on Tuesday.

(Ford investing $500m in battery-truckmaker Rivian. Click Here to find out why.)

Ford’s job announcement comes about six months after General Motors revealed major cuts of its own, an estimated 14,000 workers, mostly in North America, getting the axe. But, unlike GM, which will shutter five factories, including three assembly plants in the U.S. and Canada, there are no shutdowns in Ford’s plan.

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