Ford Plans to Layoff Its Labor Workforce, Putting More Than 70,000 Employees At Stake!

As if Tesla’s controversies weren’t enough to shake the whole car industry, thousands of Ford fans, customers, and investors all over the world were shocked when the company announced its plan to cut down their salaried workforce.

The Controversial Announcement

According to Ford’s CEO Jim Hackett, they need to conduct layoffs to improve the company’s financial health.

Last Friday, Ford announced its plan to layoff its salaried workers, putting over 70,000 employees at stake to increase the company’s efficiency. While the said number is just an estimation, the company expects to give out more details by the first half of 2019.

This, after Ford’s shares, fall more than 1% at $9.12. The latest downward trend amounted to a total of 27% stock downfall of Ford since the beginning of 2018. Hackett says it’s one of the strategies he needs to implement during his time to protect the company from going bankrupt.

Streamlining the Costs

The restructuring plan announcement came after a few analysts and investors were pressing the recently-appointed CEO for more details regarding his plans and strategies to revitalize and salvage the company. Ever since the year 2018 started, its shares and profit have been sliding and trailing behind General Motors Co, Tesla, and others, whose performances remained steadfast and strong.

Some analysts say the said announcement reflects Mr. Hackett’s desire to reorganize the company structure to move faster and be more productive.

Ever since Mr. Hackett took the job last May 2017, he emphasized his desire to improve Ford’s overall fitness by streamlining the process of how engineers and employees build and reinvent cars while saving more money in the process. After the layoff announcements, the analysts suspect Hackett plans to achieve his financial fitness plan by buyouts. The company targets to cut an astounding $25.5 billion in costs by 2022.

The Restructuring Process

According to Ford, they plan to cut more than $11 billion of restructuring costs for the next 3-5 years. The analysts suspect most of these cuts would come from overseas businesses which have struggled for years, particularly in the European and South American continents.

According to Ford’s spokeswoman, the company will let the workers know in advance in case they’re included in the layoffs, as well as their other plans of reorganization since they want to be transparent with their workers.

Furthermore, each management layer will be tasked to restructure their own group to allow for an easier transition process. According to Morningstar Inc analyst David Whiston, the early announcement was made to condition the minds of Ford’s employees and ease their shock of an impending job loss. Or if not, Ford hopes that some people may opt to resign and leave early instead of waiting for the layoff.

Ford’s Performance Over the Years

Prior to Hackett’s management, the company already underwent a massive restructuring process under former CEO Alan Mulally. The costs have increased in the past few years as they increased their workforce especially in critical areas like engineering, research, and development.

The company also spent an astounding $8 billion budget for engineering and RD, outpacing GM’s budget by 10%. Despite the bigger budget, GM’s cars sell more in the global market compared to Ford. While Ford offered buyouts in the year 2017 to layoff 1,400 jobs, Hackett pushed the deeper cuts and layoffs since taking over the company.

Since 2012, Ford’s global workforce increased up to 18% and totaled around 202,000 as of last year. This includes active employees as well as those who have resigned, retired, or have been inactive throughout the years, though.

Ford also says they’ll be targeting areas and most profitable business lines, specifically the sports-utility vehicles and notable trucks in North America to use their funds and increase their sales and profits effectively.

During the company’s second-quarter conference call with investors and analysts, Adam Jonas, the analyst of Morgan Stanley criticized Hackett and his new management for not spelling out their specific moves to boost Ford’s performance and pull its sales and profits back up. He even questioned whether or not Mr. Hackett has the ability to salvage Ford and if he’s still expected to retain his job when the company is ready to announce their restructuring plan.