Ford confirmed Wednesday it will eliminate about 1,400 jobs in North America, the latest in a series of cost-cutting moves, as it struggles to reduce losses and get an $11 billion restructuring program on track.
Ford said the cuts were not forced by the coronavirus pandemic, which has hammered the second-largest domestic automaker’s bottom line. Ford posted a $1.9 billion loss for the second quarter, and is expecting to be in the red for all of 2020.
“We’re in a multiyear process of making Ford more fit and effective around the world,” Ford said in an e-mail to employees on Wednesday morning. “Toward this goal, we plan to offer a voluntary incentive program for U.S. salaried colleagues in some functions who are retirement-eligible as of Dec. 31, 2020,” the memo continued.
Last year, Ford eliminated 7,000 salaried jobs worldwide. Those cuts were among the first steps planned by the “Smart Redesign” program developed under current CEO Jim Hackett. The restructuring is widely expected to yield still more job reductions going forward, said Joe Phillippi, founder of AutoTrends Consulting.
Hackett has taken heat for Ford’s lackluster performance on the stock market and recently – and unexpectedly — announced he will hand over the reins to COO Jim Farley on Oct. 1.
Like its competitors, Ford is shifting emphasis away from gas and diesel-powered vehicles to battery cars and trucks, which means the company will likely need to eliminate engineers, designers and others working on products and technology as they are phased out.
That is clearly reflected in the announcement of the “U.S. Voluntary Incentive Program,” with Ford’s email to employees noting, “We have reprioritized certain products and services and are adjusting our staffing to better align with our new work statement.”
Ford — and its Detroit-based rivals — has used buyouts in the past to reduce headcount, though layoffs have sometimes followed when a company couldn’t get enough employees to sign on voluntarily.
But the likelihood of further job cuts hangs over Ford. Analyst Adam Jonas, of Morgan Stanley, said he saw the need for the automaker to trim its workforce by a “further” 23,000 on top of the 7,000 jobs eliminated in 2019.
If anything, pressure on the automaker has only been increasing. While its second-quarter loss was significantly less than Wall Street’s consensus forecast, the company admits it will be struggling in the red for the rest of 2020. Its stock price, meanwhile, has been in the doldrums for a number of years and was hurt further by the elimination of its dividend.
With a market capitalization of $26.7 billion, investors see Ford as only somewhat more valuable than startup Nikola Motors — which has yet to build a single vehicle — at $15.5 billion.
Complicating matters, Ford must invest billions in new technology including both electric and autonomous vehicles.
The company has been straining to rein in spending and recently won approval to defer debt payments of nearly $1.5 billion on loans from the Department of Energy.
On the plus side, Ford ended the first half of 2020 with $39.3 billion in cash, up from $23.2 billion a year earlier, funds that could help it through not just the pandemic but the potential slump in auto sales some analysts have been predicting.
What industry observers will watch closely is how Ford fares with four critical new products set to come to market before the end of the year: 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.