“According to people briefed on the plan.”
Ford’s shares have gotten hammered as it struggles with plunging car sales, and in April even with weak truck sales, mired as automakers are in the US “car recession.” At $10.94 at the close on Monday, shares are down 37% from their high in July 2014, when Mark Fields became CEO. Shares hit a new 52-week low on Friday, despite two consecutive years of record earnings. But Ford announced that profits would decline in 2017, and at a “strategy session” last week, Ford’s frustrated directors put the heat on Fields.
After announcing in March that Ford would create 700 jobs in Michigan, more or less an optical illusion as a nod to Trump, it is now time to throw Wall Street a bone. A huge bone.
Ford is considering cutting 10% of its global workforce of around 200,000 employees (about half of them in the US), “according to people briefed on the plan,” cited by the Wall Street Journal.
That’s about 20,000 people, globally. If these cuts, or some of these cuts, hit US workers, there’s going to be some wild tweeting from the White House. But that too shall pass. Because Wall Street should be happy.
This is part of a drive to slash $3 billion in costs for 2017. Doing what American companies do best: cost cutting. The WSJ:
The job cuts, expected to be outlined as early as this week, largely target salaried employees, these people said. It is unclear if the plan includes reductions in the hourly workforce at Ford’s factories in the U.S. and abroad.
Ford is taking a “hard look” at global costs, though no official decision about the cuts has been made, “a ranking source” told The Detroit News. The source also said that the 10% cut cited by the WSJ seemed high.
Whatever the final number, we now know that these “sources” are fanning out to spread the news for maximum effect on Wall Street. Ford however said in an emailed statement of bland corporate speak:
“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.”
“Reducing costs and becoming as lean and efficient as possible also remain part of that work. We have not announced any new people efficiency actions, nor do we comment on speculation.”
Ford has embarked on a quest for the Holy Grail. It invested $4.5 billion in its electric-vehicle program and is building up a massive self-driving car program. These are key investments for its future. But it also invested in tech ventures that are not directly related to making cars, such as artificial intelligence and its much hyped Ford Smart Mobility LLC.
Whether or not these programs pan out will take years to determine. Meanwhile, sales are skidding, and something has to be done.
After six years of booming sales and soaring prices, the industry plateaued in 2016 and is now suffering once again from overcapacity, declining sales despite record incentives, ballooning inventories on dealer lots, and falling used car values that hit the leasing business particularly hard.
Production cuts and layoffs have been rippling through the industry since last fall. But the layoffs were “temporary,” a few hundred people here and there, nothing like a 10% permanent cut of the global workforce. That would be a big move. It would be a paradigm shift. Other automakers would soon follow with similar cost-cutting announcements to goose their shares. It would be a sign that “#carmageddon not yet,” as I called it earlier this month, is becoming “#carmageddon now.”
Demand from businesses in the real economy is slumping too. Read… What the Layoffs at Ford’s Medium-Duty Truck Plant Mean