Ford Motor Company (NYSE:F) is probably the most iconic American auto manufacturer in history. Yet, despite being the leading seller of trucks and SUVs—at a time when sales are soaring—Ford is expected to announce it will lay off 20,000 employees, which is about 10% of its global workforce. Of Ford’s 200,000 employees, half of them work in North America.
Ford’s share price struggled during the three-year tenure of former CEO Mark Field. The company’s share price fell around 30%, and Ford currently has a market cap far below those of Tesla Inc (NASDAQ:TSLA) and General Motors Company (NYSE:GM).
During the first quarter 0f 2017, Ford’s profits fell 35%, to $1.6 billion. This is the first time in the seven years since the Great Recession that Ford has reported a decline in profits. The company has targeted $3.0 billion in savings for 2017, a plan that is expected to improve profitability in 2018.
The company is cutting 1,400 non-factory jobs in North America and Asia Pacific. It will also offer voluntary early retirement and separation packages to around 10% of salaried workers in the sales, marketing, and human resources departments. Packages will be offered to a total pool of around 15,300 workers. The job cuts are expected to be completed by the end of September. The current job cuts are the biggest that Ford has announced since 2007, when 7,200 employees took voluntary buyout packages.
“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,” said Ford in an e-mail to employees. “Reducing costs and becoming as lean and efficient as possible also remain part of that work.”
How the Donald Trump administration will react to these massive layoffs remains to be seen. Keeping jobs in America was a major part of Trump’s election campaign platform. In January 2017, Trump applauded when Ford announced it was cancelling a plant scheduled to open in Mexico, opting instead to add jobs to a Detroit plant in 2018.
Ford isn’t the only U.S. automaker slashing American jobs. General Motors began axing thousands of jobs earlier this year, and has pulled out of a number of underperforming markets. As part of its strategy, GM is selling Vauxhall and Opel to Peugeot.
“Ford Aims to Cut Global Workforce by Roughly 10%,” The Wall Street Journal, May 15, 2017.
“Peugeot buys Vauxhall and Opel from General Motors for £1.9bn: But what happens next?,” The Telegraph, March 6, 2017.
“Ford to cut 1,400 jobs in US and Asia,” Financial Times, May 17, 2017.
“2017 First Quarter Financial Results,” Ford Motor Company, April 27, 2017.