The employees of Ford Motor Co. The No. 2 American automaker is reportedly planning to cut 3,000 jobs this week.
Workers in the United States, Canada and India will be affected by the move, which was first reported by trade publication Automotive News. About 2,000 of the jobs will come from salaried positions, with another 1,000 agency employees affected.
The automaker has already cut jobs this year in design and engineering. But more cuts appear to be in the works, with a Bloomberg News report in July indicating that the automaker had an internal target of eliminating 8,000 jobs.
“Building that future requires changing and reshaping virtually every aspect of the way we’ve operated for more than a century,” CEO Jim Farley and Chairman Bill Ford Jr. wrote in a letter to company employees. “It requires focus, clarity and speed. And, as we’ve discussed in recent months, it means reallocating resources and addressing our cost structure, which is uncompetitive against traditional and new competitors.”
Short term pain for long term gain
In an interview with TheDetroitBureau.com last month, Farley spoke openly about the financial challenges facing Ford. Since taking over as CEO two years ago, he has targeted a number of areas where the automaker is not cost-competitive, including its European, Latin American and Indian unit operations.
International operations are in much better shape now, Farley said. But he stressed that there are a number of other areas that need to be addressed.
Overall, Farley said, Ford spends about $2,000 more than the competition to market, distribute and retail its products than new competitors like Tesla. Some of this can be recovered by changing policies, such as reducing advertising spending and reducing dealer inventories.
Traditionally, automakers such as Ford maintain about 60 to 70 days’ supply of unsold vehicles. The ongoing semiconductor shortage has forced dealers to cut inventory sharply, but even after those issues are resolved, Farley said, Ford will likely maintain only an average of about 30 days of supply.
But the staff will have to be cut, however.
The latest round is expected to affect various corporate silos, including procurement. Meanwhile, there will be changes to the company’s structure, Automotive News suggested.
Change is coming
Beyond reshaping its marketing and distribution operations, Ford has split its engineering and manufacturing into two separate entities. Ford Blue now focuses on traditional gas products, with the Model E tasked with developing and producing the electrified products that will grow to dominate the company’s lineup.
As the switch to battery increases, analysts predict Ford Blue will experience the sharpest cuts.
“We have skills that don’t work anymore and we have jobs that have to change,” Farley said during an earnings call last month. “In the past, often indiscriminately, we eliminated the cost. That’s not what’s happening now at Ford. This is a different kind of change, where we’re reshaping the company.”
One of the challenges facing Ford is determining which employees can be retrained to adapt to the changes the company is making, which can be especially difficult for engineers trained in developing internal combustion engines and related components .
“None of this changes the fact that this is a difficult and emotional time,” said the letter sent to employees this week. “The people leaving the company this week are friends and co-workers, and we want to thank them for all they have contributed to Ford. We have a duty to care and support those affected, and we will fulfill that duty by providing not only benefits , but also significant help in finding new career opportunities.”
Ford employed about 187,000 people worldwide earlier this year, according to its corporate website. This included 88,000 in the United States. Of this group, 57,000 are hourly workers.
While Ford is expected to continue cutting jobs to reflect its changing strategies, it is also likely to hire thousands to handle new lines of work. That will encompass everything from the development of new electric vehicle technologies to in-car infotainment and self-driving systems, Farley said during an interview last month with TheDetroitBureau.com.