Ford Motor Co plans to announce as early as today 1,000 job cuts in the North American market.
The reduction is part of an ongoing, $11 billion restructuring, several Ford insiders told TheDetroitBureau.com, and not a response to the coronavirus pandemic – though that has hammered the automaker’s earnings and will likely result in a full-year loss, the automaker has warned.
Ford officials declined to confirm the job cuts, though spokesman T.R. Reid also declined to rule out the possibility, noting that “We’re all the time making decisions to streamline the business.”
(Shake up at Ford: Hackett out, Farley in as CEO.)
Insiders told TheDetroitBureau.com that the cuts could be announced as early as Wednesday morning and would all but certainly be revealed before the Labor Day holiday break. They stressed that the plan calls for buyouts, rather than layoffs, focusing on workers who are already near to retirement.
Ford CEO Jim Hackett announced a broad restructuring program, dubbed “Smart Redesign,” last year, and one of the first steps was the elimination of 7,000 salaried jobs worldwide. Last August, Morgan Stanley auto analyst Adam Jonas wrote that he expected as many as 23,000 additional job cuts would be needed.
Joe Phillippi, head of AutoTrends Consulting, said this week that Ford certainly will need to keep trimming, with a focus on designers and engineers working on conventional gas and diesel products. Like its competition, Ford is investing heavily in the electrified vehicles that are expected to begin to dominate the automotive market during the next decade,
Shifting emphasis to electric and autonomous vehicles was a key to Hackett’s restructuring plan but the upcoming job cuts are likely to mark the last step in that program he will be involved in directly. Hackett unexpectedly announced plans to retire a month ago. He will be succeeded by Jim Farley on Oct. 1.
The 58-year-old Farley is expected to only accelerate the transition from classic, internal combustion technology to battery power, as well as pushing into connected and autonomous vehicle technology. He also is expected to accelerate the pace of Ford’s planned restructuring.
While analyst Phillippi said he doesn’t think Ford is responding “out of panic, per se,” with the new job cuts, he sees the company as needing to continue to streamline its operations.
(“You want to be there” when the EV market takes off, Ford CEO Hackett tells shareholders.)
Ford lost $1.9 billion before interest and taxes during the second quarter and is expected to remain in the red for all of 2020. The coronavirus clearly has contributed to that problem but the automaker has had other issues. For one thing, its decision to move almost entirely out of the passenger car market to focus on pickups, SUVs and other light trucks hasn’t gone as smoothly as expected.
It will have to score big with four new products it is bringing to market in the coming months, an all-new version of the F-150 pickup, the new Bronco and Bronco Sport SUVs, and Ford’s first long-range battery-electric vehicle, the Mustang Mach-E.
Investors have grown increasingly wary of Ford stock under Hackett, especially since the automaker cut its dividend. Shares closed at $6.83 on Tuesday, up from a 52-week low of $3.96, but well below the year’s high of $9.65.
With a market capitalization of $26.7 billion, investors see Ford as only somewhat more valuable than Nikola Motors, with a market cap of $15.5 billion – even though the Phoenix startup has yet to build a single vehicle.
Despite Wall Street’s growing fascination with EV start-ups – at the expense of established automakers – Farley said during a conference call last month, “I think we’re in a great position. I’m feeling great about ourselves” compared to new competitors like Nikola and Tesla.
Though Ford actually ended the first half of 2020 with $39.3 billion in cash, up from $23.2 billion a year earlier, analysts are worried about its cash burn rate. Notably, the second-largest U.S. automaker recently won approval to defer debt payments of nearly $1.5 billion on loans from the Department of Energy.
The automaker recognizes it will take time to get its house in order, said a senior official Tuesday evening, talking on background. The restructuring plan laid out by Hackett is barely halfway through and there may be other big moves to come.
(CEO Hackett calls Ford’s restructuring “more of a redesign.”)
That was echoed by Ford’s Chief Financial Officer Tim Stone who said during an earnings call in July that “Our journey will be a long one.” Nonetheless, he declared, “Ford is positioned to win this race.”
