Ford Motor Co. is looking at cost cuts, including personnel cuts as high as 10 percent to its global operations according to one report, as the company looks to shore up its lackluster stock performance and fortify its slipping profits.
The Wall Street Journal reported Monday night those cuts could target salaried employees, and reduce the automaker’s global workforce by approximately 10 percent. But a ranking source told The Detroit News that number seemed high.
The company is taking a “hard look” at cost-cutting but no official decision has been made, said the source, who spoke on the condition of anonymity because they were speaking about company business that has not been announced.
Ford has previously signaled it plans to reduce operating costs. Ford Chief Financial Officer Bob Shanks said in September during Ford’s Investor Day that the company expects to cut “about $3 billion annually in 2016, 2017 and 2018” to support Ford’s investments and expansions into capital-heavy investments in the areas of electrification, autonomy and mobility, which Ford calls “emerging opportunities.”
Ford has about 201,000 employees, so a 10 percent reduction would mean a possible loss of 20,000 employees. Roughly half of Ford’s employees are based in North America. It was unclear whether cuts would affect any of the company’s hourly workforce.
The automaker in a statement Monday night 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.
“Reducing costs and becoming as lean and efficient as possible also remain part of that work,” the emailed statement said. “We have not announced any new people efficiency actions, nor do we comment on speculation.”
Talk of cuts come as investors grow skeptical that CEO Mark Fields and his strategy will pay off. The company is investing heavily in the emerging areas of self-driving cars, ride-sharing and other mobility areas, while trying to fortify the company’s “profit pillars” in SUVs and trucks, and transforming its luxury and small-car business.
Ford has poured money and time into those more future-focused expansions, which aren’t currently generating much revenue. As auto sales slow following record years, tension grows between those investments and the Dearborn automaker’s traditional business.
Last week, Ford’s directors held a “strategy session” to review the company’s priorities, and stockholders were critical of the company at its annual shareholders meeting on Thursday.
Despite several years of revenue growth and profits, Fields’ vision for Ford’s future has failed to generate much excitement on Wall Street. Shares in the nation’s No. 2 automaker were comparatively unmoved by two years of record profitability in 2015 and 2016. On July 1, 2014, when Fields assumed the Helm, Ford shares closed at $17.41; stock prices have declined roughly 40 percent since then. Ford traded up .46 percent at $10.99 in morning trading Tuesday.
Meanwhile, Ford’s first-quarter 2017 profits fell by 35 percent due to rising costs, pricey recalls and a drop in fleet sales. The company expects to make $9 billion this year, down $1.4 billion from 2016, when the industry saw record vehicle sales.
The angst amid executives and investors surrounding the stock price has been palpable. During the shareholders meeting last week, Executive Chairman Bill Ford Jr. told Blue Oval shareholders that he’s “as frustrated as you are by the stock price.”
“Most of (the Ford family’s) net worth is tied up in the company, and stock price matters a lot to us,” he said. “We’re frustrated, but our business is performing well. We’re making investments both for today and for tomorrow, and I believe that’s the right thing to do.”
Ford has in the last six months announced multiple multi-million dollar investments in U.S. manufacturing facilities as President Donald Trump has pushed automakers and other companies to invest in U.S. operations and create more jobs.
“We want to be the car capital of the world again,” Trump said while delivering a speech in Michigan in March. “We will be, and it won’t be long, believe me.”
Detroit automakers were also summoned to the White House in the first days of Trump’s tenure.
“We’re bringing manufacturing back to the U.S. big league,” Trump said at a January meeting that included Fields, General Motors Co. Chairman and CEO Mary Barra and Fiat Chrysler Automobiles NV CEO Sergio Marchionne, as well as other executives from Detroit’s Big Three.