Streamlining rarely comes without a reduction in personnel, and it appears Ford’s $11 billion restructuring plan will indeed bring about a loss of employees in North America. While the automaker previously hinted at steep job losses in its troubled European operation, a recent report shows employees need to be worried on several continents.
According to the Detroit Free Press, Ford’s plan will leave many unemployed white-collar, salaried workers in its wake.
Some 85,000 of Ford’s 201,000 worldwide employees reside in the United States. The number of salaried employees totalls 70,000 on a global scale.
At this point, the automaker doesn’t know exactly how many positions stand to be cut, though salaried workers were told Thursday of the basics of the streamlining plan. The ultimate goal is for Ford to become a leaner, less top-heavy operation, with cuts not targeted at any one specific area.
“We need to dig into the process deeper before we know the absolutes,” said Mark Truby, Ford’s vice president of global communications at Ford, in an interview with the Free Press. “What we’ve kicked off is a redesign of our global salaried workforce — in North America, Europe, Asia, South America. … ”
Kiersten Robinson, Ford’s group vice president and chief human resources officer, reiterated the objective of CEO Jim Hackett’s plan.
“You’ve heard (CEO) Jim Hackett talk about fitness and how we need to be more responsive, innovative, agile. Given that, it’s really important when you consider how we modernize the workforce, skills and capabilities we need,” she said. “Yesterday we shared with our global employees that we’re in the early stages of reorganizing the salaried workforce. This is designed to help us become more fit as a business.”
Ford’s near-term product plans are well known at this point, and it doesn’t look like any hourly workers need to be concerned in the United States. Bloomberg reports that Morgan Stanley estimates the cuts to number around 20,000.
Pushing salaried employees out the door could prove a boon to the company’s stock, which has all the lift of a brick tossed off the roof of the Glass House. Product and visionary tech announcements haven’t done the trick. Meanwhile, a number of factors have all put downward pressure on the automaker’s finances and, correspondingly, its stock.
Investors and analysts all want to see a share value course change, which is what Hackett’s streamlining plan hopes to accomplish. Otherwise, former CEO Mark Fields’ tenure serves as a lesson. After coming under fire recently for failing to turn around the company’s plunging stock price, Hackett told an interviewer that everything that could be done to right the financial ship is being done.
“We are not in a crisis,” Hackett said last month. “The company’s in great shape.”
[Image: Ford Motor Company]
Hmm; I’ve seen this movie before.
Your next Ford SUV might be built in Michigan, but it will be designed in Asia.
So either Ford just realized they had 20,000 non-essential people on the payroll or they’re cutting 20,000 people who were doing useful tasks [engineering? quality? recall management?] that Ford will do without.
Either way, not a great reflection on Ford management.
In many cases, the CEO gets a direct benefit (bigger bonus) from workforce reductions. The reduced headcount means less is being paid on wages and salaries, which boosts operating profit. Meanwhile, the cost of eliminating those people (severance, etc.) is treated as a one-off (extraordinary item), which is not part of operating profit and so doesn’t count for bonus calculation purposes.
So, the CEO makes money by firing people.
jpoicke
Maybe Ford realized without cars in its lineup. Ford no longer needs people to design, test and market those cars.
jpolicke,
I think you’ll find massive duplication of roles and responsibilities.
Its quite a simple task in theory to identify the same or similar functions, roles, etc.
You create a simple matrix, along the x axis you have functions, roles, responsibilities, etc and on the y axis you list positions. You then populate the matrix.
Also it would be interesting to see the new business architecture framework.
Ford most likely for years used the same business framework. This is why Asia and EU auto manufacturers are in front, they are leaner.
Next the US needs to remove regulatory barriers and the chicken tax to force the manufactuers to become more competitive.
Trump’s MAGA can’t make poorly managed US businesses competitive.
If you figure each car line had a development/engineering/marketing team and you’re getting rid of everything except trucks and SUVs, then that’s a lot of unneeded team members. They might not have been dead wood before but they sure are now.
mike,
Your perspective is quite accurate as well.
Ford needs to run leaner.
Even though the F-150 is a great money spinner I think the Ram and Silverado lay bigger golden eggs. The F-150 was quite an expensive exercise by Ford.
@BAFO – This is just Ford finally following the business model of Asian/EU automakers. No automaker should try to satisfy every dang segment.
Just focus what you’re good at (making a hefty profit with).
Ford should’ve tightened up their lineup decades ago.
But removing the Chicken tax would have zero net effect on US automakers, except maybe Toyota, Nissan and or Honda might have to work a little harder for fear of Mahindras or Ssangyongs invading the US market, but they’re probably not interested in selling in the US.
It’s a tough market for shoddy cars/trucks to break into, US Lemon Laws and other consumer protections in place, not to mention very poor resale value.
Remember Ford, GM and Ram import (cargo) vans are subject to the Chicken tax, and they’d love for it to be killed off.
Besides, only Europe can stop the US Chicken tax, at the point Europe ends their own Chicken tax.
Although despite all you squawk about, you still can not name a single US “regulatory barrier”, nor the specific global car or truck it would impact enough to prevent its importation to the US.
So much greatness. USA! USA! USA! USA!
They can get a job at their local Amazon distribution center – I hear they are paying $15 an hour now.
the CEOs do what they like and the middle class suffer what they must
Ahh the Trump tax cuts are working well. Fords first quarter profits were up 9% and now they are cutting employees. All of those salaried employees can go get part time jobs in the gig economy while the rich get richer! What a great country we live in.
It’s a ripe time for a stock buyback to artificially re-inflate their share price and keep the Wall St. gravy train from running off the rails for a few more months.
The other way to look at it that it gives them breathing room to make the needed changes before the next recession. The idea is to remain in business, which directly benefits workers not just at Ford but across the automotive spectrum. As much as I hated the bailouts, that’s the reason for them and it was a legit reason.
The CEOs do as they please, and the middle class suffers what they must
I have no doubt that, in a large corporation such as Ford, there are redundant positions. Reevaluating the workforce every so often isn’t a bad idea to get rid of pointless jobs. This could be that.
This could also be a desperate ploy to get a short-term bump in stock price and not actually add any value to the company in the long-term.
If it’s trimming fat, it’ll have positive effects on stock price and actually be sustainable for the company. If it’s the latter, then it’s all about delaying the inevitable.
As SCE to AUX said, they’re likely going to outsource a lot of non-manufacturing jobs to low-cost nations.
Where do you think the next generation of small diesel engines will be built?
What does that have to do with cutting white-collar jobs?
jfb43
Since there will not be a next generation of small diesel engines. All the jobs related to their development will be eliminated.
The billion dollar question is if there is fat to be trimmed.
I’ve worked for two organizations which were running on a skeleton crew when a dogmatic new leader came in and promised to cut our way to awesomeness. It didn’t work in either of those cases, because there was no fat to cut.
Cutting the fat can be a powerful tactic. But, knowing when and where to apply it requires a great deal of thoughtful analysis. Many leaders skip the analysis and just follow their gut, which leads to rather random results.
It was a lot easier to win by blindly cut the fat in conjunction with a rollout of office computing technology back in the 1990s — but everyone uses office computing technology now, and so the results of “cut your way to awesomeness” are mixed at best. It would work better if managers were better at identifying the situations in which this tactic actually works. I have no idea if Ford is in a situation in which there is cuttable fat — but I can tell you that blind faith in cutting your way to awesomeness is misplaced. It *can* work, but you’ve got to know how and when to use it.
It’s hard to believe that 23% of the salaried workforce was pointless fat. This sounds like they’ve gone down to bone.
Not sure which functions I’m comfortable shipping to low-cost nations. Sounds like any time you call Ford in the future it’s going to sound like laptop customer support.
Since they’re investing so heavily in autonomous vehicles, maybe there’s AI in the pipeline to replace all these workers.
That 23% is a number Adam Jonas pulled out of his ass. But “analysts” like him (who create no value whatsoever) would happily see a company cut 75% of its employees if it meant the share price would go up long enough for him to cash out.
They can start by getting rid of Hackett.
No mention of Trump idiotic tariffs?
hmmmmm
Nobody wants to fight about it — and Ford knows many their customers are Trump fans.
But, yeah, the chronology is basically:
1) Trump starts tarriff fights and trade wars, substituting swagger for smarts. This increases the risk and expense of operating a globally distributed business.
2) Ford cuts product selection (mostly sedans) to focus on high-margin high-volume vehicles (CUVs and trucks).
3) Ford starts laying off employees — most likely the employees who were supporting those canceled products.
That’s how the story looks. It looks to me like Ford is using some hard-nosed MBA logic here to adapt to the Trumpian market conditions by trimming leas profitable (but still profitable) product lines (and the workers employed to work on those products) in order to mitigate the market volatility brought on by having our national trade policy set by a swaggering orangutan. But they’re being very careful not to say that in public and to separate out the steps, because 80% of the F-150 crowd will swear off Ford products for life if they catch wind of the reasoning behind these moves.
At least that’s how it looks to me. The MAGAs will disagree, but they’ll just regurgitate whataboutist talking points at me. ¯_(ツ)_/¯
This will make a fantastic business school case study — in about 30 years.
US is service economy for the last 50 years. All brain power and skilled workforce now is in Asia. Very clever Mr.Hackett.
The best Aerospace engineers are still in America.
It is just matter of time when they will be outsourced. US cannot even make ships, even for military. Only big expensive boondoggles. Lost art.
My local university has made up for lack of government funding by training foreigners. Foreign students pay higher tuition, and so have become a profit center, and many of them sudy aerospace engineering and return to their country of origin.
Your tax savings at work!
P.S. Oh, and nativist immigration policies mean that graduates of US universities DON’T automatically get a green card. So, we gather the best and brightest in the world, bring them to the USA, teach them a profession, give them experience working in the American work-culture, and then we make all of them pay the bill and leave. Some of them would really prefer to stay contribute to American scientific and engineering efforts, but we generally just tell them go home. SMH
Especially laying off the whole Ford Fusion development team, there is no need for car engineers in foreseeable future.
There are lot of positions available in social studies and French poetry, And Amazon fulfillment centers too, why not? Unemployment rate is record low – there are lot of jobs in service economy – to serve engineers in Silicon Valley, from China and India.
I think Hackett’s days are numbered.
This might be the first rational thing you’ve said about Ford in years.
But just wait until Lincoln unveils its line of luxury file cabinets!
The Hermes Conrad Signature Edition file cabinet!
Ford is going to be hurtin’ for certain – as in pain train city – when the next 5% drop in pickup truck/SUV sales comes, let alone 10%-15% drop.
Ford is so overexposed to pickup truck, alone (the F Series), that the most credible analysts have the F150 and F25, combined, as generating 80%+ (as high as 84%) of Ford’s total net profit on a global operating basis.
IOW, Ford’s almost certainly the most exposed, one-trick pony volume automaker in the world at present, and they have a complete moron as their CEO.
Good luck, Ford Family! Hackett is to automaker CEO’S what Marty Mornhinweg was to NFL coaches.
I tend to agree with you here. I have had some, even a Ford dealer, tell me that everything is great and ‘they’ have a plan.
From an eggs in the one basket place, yowza…any blip of measure in fuel prices and they are in deep sh!%. I find the situation quite disconcerting, seems like some effort should have been put forth into the CUV craze, perhaps a bit more than their current offerings.
Fact is during the last gas price spike the F series was still the number one selling vehicle in the US.
Shhh lets not talk sense here in ANOTHER Ford post. Packing them in for a Ford bash is obviously more important around here than talking about a serious frame “defect”, notice the lack of regulars in that one. No no, they wait in hiding until for next Ford coverage. The comment numbers prove that.
Speaking of those JLs and their track bracket It looks like they may have known about this issue for quite a while before the recent announcement. Saw my adopted son (my son’s friend who looks to me for advice) JL today that he’s had since July. There is a paint pen X on the location in question and there aren’t markings on any other of the brackets on the front part of the frame.
“You’ve heard (CEO) Jim Hackett talk about fitness and how we need to be more responsive, innovative, agile. Given that, it’s really important when you consider how we modernize the workforce, skills and capabilities we need,”
This is nauseating horse-crap par excellence. Just once I’d love to hear some HR pantload just tell it like it is instead of trying to spray perfume on a turd: “Nobody is buying our dawg-schitt cars so we are just gonna quit making them. Yeah, we’re still still gonna try and squeeze $ out of idiots that think they need a pick ‘em up truck to haul 2 bags of potting soil home from Wal Mart. But there ain’t enough meat left on that bone to justify keepin’ all you sons-a-bitches around. Think of it this way: Remember how during your orientation we told you that you were now part of the Ford Family? Well, Daddy has pissed away your college fund at the craps table and mama has snorted your dowry up her nose. The family is broke. So, you are being sent to live with your 3rd cousin on a Nebraska hog farm. And, oh yeah…that check grandma sent you for your birthday? You’re gonna need to use that to pay for the bus ticket.”
The ANALysts make money by ‘sounding’ intelligent. They don’t have to actually know how to run a business.
23% is a big figure–it implies that there is a lot of fat. I doubt there is. I doubt there was even BEFORE Ford laid off a few thousand salaried people before Hackett’s arrival.
Unless they come out something radical (like cars that run using tap water, or better yet, waste water!), automakers will never have stock valuations with P/E ratios like Amazon’s 150!
The idea that ‘yes you can’ is absurd.
Of course, the world has changed since the 25 years following world war 2. However, during that era, the benefits technological advancement were distributed more fairly between workers, management, and capital (owners). Now they are not.
Hackett is not a moron. However, he is no more capable of making big improvements to Ford than I am of leaping over a building. Our society is stupid for tolerating these overpaid people at the expense of the other 99%.
As far as pruning the car platforms, there are some savings. However, I suspect that the people who work on various engineering/manufacturing aspects of Ford Fusions rotate to other platforms as timing dictates–they don’t twiddle their thumbs for a couple of years between updates. They probably rotate on the F-150, or Mustang, or Expedition. So if you cut all of them, you have fewer people to make sure the F-150’s A/C is designed and assembled correctly.
And that brings us to my final point. When it’s not, it can be VERY expensive. Just ask GM how the Cobalt ignition key worked out–or even Ford, when during Nasser’s era (another genius), they got rid of the ‘old folks’ and hired new engineers, and were shredding tires of the ‘new’ Explorer on the CONVEYORS, which had to be redone. Not nearly as costly as the Cobalt key, but costly.
So yes, cut your auto staff. Keep just the ‘best’. And if they overlook anything—well, the costs of cleaning up will probably be greater than the ‘savings’ of all the jobs cut. But again, the CEO will be richly overcompensated, by a board consisting of other overcompensated CEOs….our incestuous system of corporate governance is very rewarding!
So Ford’s global salaried workforce is roughly 70,000 employees and JP Morgan estimate roughly 20,000 will be eliminated….also known as approx 29% of that workforce. Simply put, if a company is able to eliminate 29% it’s salaried workforce and continue to operate than it is EXTREMELY fat and poorly managed. Think about it a moment, they are potentially cutting out between 1 in 3 to 1 in 4 employees (salaried) and expect to move forward just fine.
Something doesn’t ring true here, not one bit.
again, 20,000 is a number Adam Jonas pulled out of his ass as something he *wishes* to see. He’s been after Hackett’s hide from the word go.
The difference between American and German/Japanese companies is that German/Japanese do not lay off experienced engineers and then hire college graduates or third world country engineers on H1B visa as replacement. They keep knowledge/know-how in house and keep moral high. That translates to better products. Of course there is always possibility of disruption but you still need experienced engineers to translate that into real world product. Xerox, Kodak, IBM, HP and etc are good examples how American companies die while Japanese prosper under same market conditions.
You make sense here. Good analyst.
You can thank Alan Mulally for this.
He was a cancer to Ford.
Everyome criticizes Hackett and they’re not wrong. But what about Billy Ford? The result of lucky sperm, he is dumb enough to keep hiring and trusting these geniuses?
I am tired of looking at Bill Ford’s deer in the headlights lights expressions.
When Hackett announced the cancellation of all Ford’s passenger cars the company stock went below 10.usd. Now after announcing future job cuts Ford stock has gone under 9.usd for the first time in six years.
Hackett has become similar to a millionaire ball player hitting only .220. How much longer can Ford suffer through these diminished returns. Hackett had brought Ford to an historic low in just over 15 months. Not even Roger Smith could make that claim.
What happened with that furniture company he came from? He destroyed it too? Reminds me Minimum Bob.
Billy Ford is 1-5 in pushing thru CEOs, including himself.