Ford gives underperforming employees option to take severance package

Jordyn Grzelewski
The Detroit News

Ford Motor Co. is giving longtime employees with job performance issues the option to voluntarily leave the company under a policy update, the company confirmed Monday.

A new option gives certain employees the ability to leave the company with severance packages rather than go through the automaker's performance management system, known internally as a Performance Enhancement Plan or PEP, according to company spokesperson Marisa Bradley.

That plan has long been in place for U.S. salaried workers with at least eight years of service at Ford. Under that process, white-collar workers who have been flagged for underperforming in their roles have weekly check-ins with their managers and objectives to meet over a roughly six-week period. Failure to turn around their performance at the end of the process could result in their termination.

Managers were informed of the new severance option in a note Oct. 4, and the updated policy is now in effect. The Wall Street Journal first reported the new component of the program.

Typically how Ford's performance management system would work, Bradley said, is that employees who are struggling to meet their performance goals would have numerous conversations with their managers before the company made them go through a PEP. Employees who go through the process have to show each week what progress they are making on turning things around.

The updated policy now allows employees who have reached that point of intervention to leave the company with severance payouts based on length of employment, continuation of benefits and career transition services. The process would remain unchanged for those who opt to go through a PEP rather than leave — meaning they could be subject to termination, without severance, if they ultimately fail to turn around their performance.

The company framed the policy update as a talent initiative it implemented after conducting market research and benchmarking its practices against those in the tech industry.

"Ford is looking at all aspects of the business to support its transformation including how employee performance is managed," Bradley said in a statement. "Recently, updates were made to simplify the U.S. separation programs in the U.S., to reflect market practices and internal feedback. This includes an option to exit voluntarily rather than experience the performance improvement process. These changes give employees choice and improves the overall experience."

The updated policy is not geared toward achieving an attrition or cost reduction target, Bradley said. She said that "well under" 100 employees go through a PEP each year.

The new severance option is being implemented against the backdrop of broader changes taking place at Ford, amid what executives have described as a "re-founding" of the 119-year-old company.

Earlier this year, CEO Jim Farley announced a major internal restructuring around three key business units: commercial vehicles, EVs and software, and traditional combustion engine vehicles. That restructuring is being implemented as the company aims to execute its Ford+ growth plan, which looks to leverage electrification, digital connectivity and commercial vehicles to drive new forms of recurring revenue and change Ford's relationships with customers.

Farley has publicly acknowledged that the changes taking place at the company will require reshaping Ford's workforce. Earlier this year, Ford slashed some 3,000 positions — 2,000 salaried jobs and 1,000 contract jobs — in a bid to drive efficiencies and cut redundant roles. Prior to that, Farley had said that the company had "too many people" in certain areas — even as it looks to beef up in others, like software development.

As part of its growth plan, Ford is targeting $3 billion in structural cost reductions tied to combustion engine vehicles by 2026; a 10% companywide profit margin by 2026; and an annual EV run rate of 600,000 vehicles by the end of next year and 2 million by 2026.

Meanwhile, Jeep maker Stellantis NV announced last week it had offered certain salaried U.S. employees a voluntary separation package as parts of its "transformation to become a sustainable tech mobility company and the market leader in low-emissions vehicles," a company spokesperson said.

Eligible employees include those who are 55 or older and have been with the company at least 10 years. Employees who have 30 years of service with a pension also are qualified. Eligible Stellantis employees have until Dec. 5 to accept the offer.

Twitter: @JGrzelewski