Ford – facing heavy costs for new technology and slowing U.S. car sales – is cutting 1,400 non-factory jobs in North America and Asia Pacific this year in an effort to boost profits and rescue its sagging stock price.
The company will offer voluntary early retirement and separation packages to around 10 per cent of salaried workers in departments such as sales, marketing and human resources. The packages will be offered to about 15,300 workers, including 600 in Canada, company spokesman Mike Moran said Wednesday. It expects the actions to be complete by the end of September.
The cuts are the biggest to Ford’s U.S. white collar staff since 2007, when 7,200 workers took voluntary buyout packages. Ford believes it will meet its targets by voluntary means, Moran said.
“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,” Ford said in an email sent to employees early Wednesday. “Reducing costs and becoming as lean and efficient as possible also remain part of that work.”
There was no immediate comment from President Donald Trump, who needled Ford during his campaign over its plans to build a new small car plant in Mexico. Ford cancelled its Mexico plant in January, opting instead to add 700 workers to a suburban Detroit plant in 2018 to make electric and self-driving vehicles. In March, Ford announced a plan to create or retain 130 jobs at a Michigan engine plant. Trump applauded both actions.
“Car companies coming back to U.S. JOBS! JOBS! JOBS!” Trump tweeted in March.
The offer will also be open to about 9,600 workers in the U.S., 1,000 in Mexico and 4,141 in Asia. The Dearborn, Michigan, company says it will release more details to employees in June.
Ford isn’t the only automaker looking to get leaner as U.S. demand for new vehicles slows down. Last month, General Motors Co. Chief Financial Officer Chuck Stevens said GM was considering cuts to its white collar staff in order to rein in costs.
Certain areas of the business won’t be targeted, including Ford’s product development and credit divisions. Factory workers and white-collar employees in Ford’s plants won’t be affected. Information technology workers also aren’t targeted.
Ford also isn’t likely to cut jobs in its emerging businesses, like its research centre in Palo Alto, California. Ford said last August that it planned to hire more than 100 engineers, researchers and others in Palo Alto.
Ford has been hiring steadily since the recession as U.S. vehicle sales roared back to reach record highs. Ford hired more than 15,000 factory workers between 2011 and 2015.
But investors are clearly worried that after seven straight years of growth, U.S. sales are peaking and Ford’s share of that critical market has been falling. Ford’s sales in Asia have been growing – they were up 9 per cent last year – but that market is volatile and far less profitable than Ford’s North American business.
Investors are also unsure about Ford’s heavy spending on technology with an uncertain future, like its recent investment of $1 billion in Argo AI, an artificial intelligence startup. The 114-year-old automaker has also embarked on a massive, 10-year plan to remake its Dearborn campus to attract tech-savvy young workers.
Ford’s stock price has fallen nearly 40 per cent in the three years since Mark Fields became CEO. Ford Executive Chairman Bill Ford told investors at the company’s annual meeting last week that he’s frustrated by that decline.
“We’re frustrated, but our business is performing well. We’re making investments for both today and tomorrow, and I believe that’s the right thing to do,” he said.
Ford shares fell 1.2 per cent to $10.81 in morning trading after the company announced the reductions.
Ford’s net income fell 35 per cent to $1.6 billion in the first quarter. It expects to earn a pretax profit of $9 billion this year, down from $10.4 billion in 2016.