Final wave of salaried job cuts hits Ford this week
Ford Motor Co. is on track to eliminate 7,000 salaried jobs worldwide by August, and the fourth and final round will hit Dearborn on Tuesday when the first of 500 U.S. employees will be told they’re no longer needed.
The automaker has already cut 200 salaried jobs in the U.S. this year. By the end of June, Ford plans to have eliminated roughly 800 total U.S. salaried jobs in various departments. Added to the 1,500 salaried buyouts Ford conducted last fall, the automaker will have cut around 7% of its U.S. salaried workforce by the end of the summer.
Following this week's cuts, Ford will have roughly 100 more positions to vacate in its technology and human resources departments by the first week of June. By the end of August, the automaker expects it will have cut 7,000 salaried positions globally, which amounts to 10% of its worldwide salaried workforce — and saves some $600 million in annual costs.
The layoffs signal that Ford, like rival General Motors Co., is trying to realign its workforce to be better aligned with what senior executives believe the company needs to succeed in an uncertain future. For Ford, that means further flattening senior management and trimming what CEO Jim Hackett sees as bureaucracy throughout the automaker's salaried workforce.
"They've got a lot of people who are no longer a fit for what's going to be happening at the company," said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor. "Organizations are starting to shed layers. It's just a different kind of management philosophy.
"How to shuffle this deck is really tough, but if you don’t do it you’re going to be in deep trouble. It’s one of those issues where you have no choice."
Tuesday's layoffs mark the end of a months-long period of uncertainty for some. One mid-level Dearborn-based Ford employee who wished to remain anonymous told The Detroit News they were looking forward to the end of the layoffs so that their team could focus.
A majority of the 7,000 cuts have already taken place, a spokeswoman said Monday. That number includes those who took buyouts late last year. The severance package employees will get Tuesday will include lump-sum payments and other benefits, a source with knowledge of the situation said. That person would not offer details.
Affected employees will be offered career counseling. They will be allowed to leave the premises immediately, or take several days before departing.
"Ford is a family company and saying goodbye to colleagues is difficult and emotional," Hackett said in a Monday note to employees explaining the status of the salaried job cuts. "We have moved away from past practices in some regions where team members who were separated had to leave immediately with their belongings, instead giving people the choice to stay for a few days to wrap up and say goodbye."
Investors in the past year have repeatedly asked Hackett for firm numbers about the size of the salaried workforce reductions. Employees have said they wanted clarity — the company was reevaluating management structures and cutting its workforce around the world even as it continued hiring in multiple areas. Outside the U.S., Ford is also restructuring in Europe, China, South America and its International Markets Group.
The 7,000 salaried positions cut globally include salaried employees who took the buyouts offered in the last year, the involuntary separations and the elimination of some positions that were open but not filled. Around 20% of the 7,000 eliminated positions would be senior-level managers, one source said. In the U.S., some contract employees will be let go as part of the salaried layoffs.
The cuts look to be far below what some had speculated. Wall Street analyst Adam Jonas had forecast Ford would cut 20,000 jobs globally. He also said last year Ford's cuts could eclipse those at GM.
GM completed a 15% downsizing of its salaried workforce and 25% reduction of its global executive workforce in February with roughly 4,000 layoffs. At the end of 2018, roughly 2,250 employees requested to take buyouts offered to employees with 12 or more years of experience with the company. GM also made reductions to its contract workforce at the end of last year, letting go some 1,500 workers.
Hackett and his senior executives have said Ford wanted to flatten the organization by removing layers of management, reducing costs and giving managers more authority to make decisions while favoring lean operations and deciding which skills are needed now and for the future. Hackett said in his note to employees that managers will now have more direct-reports, which reduces bureaucracy; the company will have nine management layers "or less" by August, Hackett wrote. Ford had up to 14 layers when he took over.
Cole said automakers are attempting to move younger professionals into management positions. Historically, it takes salaried auto employees sometimes decades to ascend the ranks to high-level management positions, and when they get there, they're burnt out or near retirement.
"One of the solutions was to take levels out," Cole said. "The new model is lean and agile."
Ford has been on a cost-cutting push since 2017. It aims to cut $25.5 billion from its operating costs over the next few years. That's coupled with an $11 billion global redesign, which includes the salaried workforce cuts. Hackett and his team have impressed Wall Street lately with stronger earnings and investments in future technology, like a $500 million partnership with Plymouth, Michigan-based Rivian Automotive.
"Even as we conclude Smart Redesign, we still have a lot of work to do in the coming months," Hackett said. "We will continue to work collaboratively and respectfully with our teams and other partners to ensure our designs are effective and fit and that our employees are treated fairly and with respect."
Cole expects those let go from Ford on Tuesday won't be without jobs for long, should they want a new one. These layoffs are much different than those that took place a decade ago amid the Great Recession.
"They're not going to go on welfare," Cole said. "They're going to find a job fairly quickly. Other companies need the people that Ford is going to be letting go."