Howes: Ford aims to reduce management layers, speed decision-making

Daniel Howes
The Detroit News
Ford Motor Co. CEO Jim Hackett said the Blue Oval "must reduce bureaucracy, empower managers, speed decision making" to "succeed in our competitive industry."

Detroit’s self-described family automaker is trying to take a kinder, gentler approach to its salaried layoffs.

But another 500 white-collar employees of Ford Motor Co. nevertheless will lose their jobs this week beginning Tuesday as part of a continuing global restructuring aiming to eliminate 7,000 salaried jobs, or roughly 10% of the global salaried workforce worldwide. There’s no way to sugarcoat this, the latest piece of CEO Jim Hackett’s “smart redesign” nearly two years in the making.

This is different in tone, in pace, in the numbers targeted and the evident rethinking of what to cut, how to do it and when. The headcount reductions are aimed more squarely at senior managers than general salaried employees to reduce management bureaucracy, to speed decision-making and to cut costs by more than $25 billion over the next few years.

"Ford is a family company and saying goodbye to colleagues is difficult and emotional," Hackett wrote staff in a memo Monday. "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."

That's scant comfort, of course, to those whose worst fears will be realized by the end of this week, the culmination of a workout unspooling in painfully slow motion. The drawn-out process has been as unnerving for employees as it's been unsatisfactory for investors looking for bigger, more dramatic cuts sooner. Hackett and his team refused to oblige, instead engineering changes intended to improve Ford's "fitness" and fatten its bottom line. 

A General Motors Co.-style bloodletting it isn’t. Not like the cutting earlier this year of 4,000 GM jobs, many to waiting cars to whisk separated salaried employees from company premises. Not like an Old Detroit layoff that’s long on swiftness and shorter on compassion — which, no doubt, is a contrast with GM that Hackett and his boss, Executive Chairman Bill Ford, are happy to underscore.

GM in February completed a 15% downsizing of its salaried workforce and a 25% reduction of its global executive workforce with roughly 4,000 involuntary layoffs. At the end of last year, roughly 2,250 employees accepted a buyout 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.

All told, Ford's reductions are smaller in scope and more publicly detailed. They do not contemplate anything like GM's plans to idle five assembly plants in the United States and Canada, confirmation the Blue Oval more effectively managed plant capacity and its relationship with the United Auto Workers despite a stunningly swift retreat in the traditional car market that slammed GM harder than Ford and rival Fiat Chrysler Automobiles NV.

This should buttress the shifting narrative on Ford's restructuring: namely, that an increased orientation toward pickup trucks and SUVs is fattening the top and bottom lines even as annual savings of $600 million kick in. In a ratings note Monday, Fitch Ratings cited Ford's "strong liquidity position" and "low automotive leverage" for providing "needed financial flexibility" to complete its restructuring.

"The company's profitability and financial flexibility are likely to improve once the redesign is complete," Fitch said. "Ford's North American business has been a relative bright spot, but even those operations have been pressured by higher raw material prices and increased warranty costs."

Put another way: Hackett's tortoise-like restructuring may be earning renewed respect among investors and directors — if not anxious salaried employees. It's tracking a virtuous circle of declining costs, rising revenue and growing profits, particularly in the profit-rich U.S. market.

Management layers by the end of the year should be reduced to nine from 14 two years ago. More than 80% of managers will have broadened areas of control. And Ford's legendary senior management bureaucracy will be reduced, a move that should earn points from critics on Wall Street like Morgan Stanley's Adam Jonas.

"To succeed in our competitive industry, and position Ford to win in a fast-changing future," Hackett wrote, "we must reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work, and cut costs."

A killer first quarter and confirmation, finally, of the scope of Ford's salaried headcount reduction do not mean the restructuring is complete. Far from it: the Blue Oval is backsliding in Europe, struggling for its footing in China, enlisting a partner in India because its vast product development operation missed crucial developments in each of those markets.

Eliminating jobs and streamlining the decision-making bureaucracy do not guarantee better results. Consistent product execution, honest assessments of strengths and weaknesses and the humility to recognize the organization and its people have more to learn does, however.

Ford is taking a few giant steps in that direction — Job One for competing successfully in the second automotive century.

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 p.m. and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.