Ford Motor Co. said Monday that it was near the finish line in its two-year effort to pare its workforce.
The company said it would lay off 800 employees in the United States over the next several weeks as part of a broader plan to shrink its salaried ranks by 7,000 people, or 10%, with the sharpest cuts at higher ranks. "Consistent with our goal to reduce bureaucracy, we will have reduced management structure by close to 20 percent," Ford's chief executive, Jim Hackett, said in an email to employees. "This will result in annual savings of about $600 million."
In the U.S., about 2,300 jobs will be cut through buyouts and layoffs, Ford said. About 1,500 have left voluntarily or with buyouts, while another 300 have already been laid off. About 500 workers will be let go starting this week, largely in and around the company's headquarters in Dearborn, Mich., just outside Detroit. All will get severance packages.
The layoffs are coming across a broad swath of the company, including engineering, product development, marketing, information technology, logistics and finance. But the company also said it is hiring in some critical areas, including those developing software and dealing with self-driving and electric vehicles.
The other cuts have been overseas, where the final phase of the restructuring should be completed by the end of August.
Hackett has been cutting costs in a push to increase profits in the face of slowing sales, especially in Europe, South America and Asia. Ford reported last month that it earned $1.1 billion in the first quarter, about 34% less than in the same period a year earlier but better than analysts had expected.
Just three years ago, Ford was considered the healthiest of the three big Detroit automakers. But it allowed management ranks to swell and was slow to adjust as consumers moved away from cars to sport utility vehicles. At the same time, President Donald Trump's tariffs on imported steel and aluminum added about $1 billion a year in costs.
Other automakers have also struggled. Ford's main rival, General Motors, has idled or greatly scaled back operations at four plants in the United States and one in Canada. GM aims to trim 14,000 blue- and white-collar jobs.
At GM, the cuts brought withering criticism from Trump and Congress, especially the closing of a small-car factory in Lordstown, Ohio. Trump campaigned on bringing factory jobs back to the industrial Midwest. GM has since announced a possible deal to sell the Lordstown plant to a startup electric vehicle maker, but it hasn't been finalized.
Jessica Caldwell, an analyst at Edmunds, said Ford had moved aggressively to trim its payroll, but she said it was not clear whether the company had sufficiently changed its operations and culture.
"At this point, I think there's a lot of groundwork being laid, but they need to keep strategizing to become this newer, more efficient company," she said. "As for major changes, we aren't really seeing that yet."
Under Hackett, Ford has planned to all but eliminate sedans from its model line in the United States, and to stock up on new types of SUVs and trucks, including a slew of electric vehicles. It is also negotiating with Volkswagen on several joint projects. The companies have agreed to cooperate in pickups and delivery vans and are discussing combining their self-driving-vehicle projects.
Hackett took over as chief executive two years ago as costs were rising and profits were falling. Analysts have criticized the deliberate pace of his turnaround, but investors have rewarded the company since its first-quarter earnings report. Ford shares closed at $10.28 Monday, down slightly for the day but up from $7.90 at the beginning of the year.
Ford's white-collar employees had been fearful since last July when the company said the restructuring would cost $7 billion in cash and hit pretax earnings by $11 billion over the next three to five years. Many have been upset that it took so long for the company to make decisions.
Factory workers have not been affected by the restructuring thus far, as the company has retooled car plants so they can build more popular trucks and SUVs.
The announced cuts, while large, aren't as bad as many had expected. Morgan Stanley analyst Adam Jonas predicted 25,000 white-collar job cuts late last year, a number that Ford would not deny.
In March, Hackett had told employees that Ford had added too many workers after the recession, going from 160,000 worldwide in 2009 back to about 200,000 as the economy improved. While Ford was growing, its revenue growth didn't justify adding that many employees, he explained.
In Monday's memo, Hackett said that Ford is departing from past practices and letting laid-off employees stay a few days to wrap up their jobs and say goodbye to colleagues. In the past, laid-off workers would have had to pack up and leave immediately.
"Ford is a family company and saying goodbye to colleagues is difficult and emotional," Hackett wrote.
Hackett told workers that under the restructuring, managers now will have seven people reporting to them on average, up from five before changes were initiated. That reduces management bureaucracy by one-third from before the "Smart Redesign" began. Before the restructuring, Ford had 14 organizational layers, but that will drop to nine or less by the end of the year, Hackett's memo said.
"Ford is squeezing every cent they can out of the current business by cutting employees, cutting products and getting out of unprofitable businesses so they can put more money into future technology like electric vehicles, autonomous vehicles and mobility services," said Michelle Krebs, an analyst with car-shopping researcher Autotrader. "The danger is cutting so much that you hurt today's business and eat your seed corn."
Information for this article was contributed by Neal E. Boudette of The New York Times; by Tom Krisher of The Associated Press; and by Keith Naughton of Bloomberg News.
A Section on 05/21/2019