After laying off 7,000 workers, what's next for Ford?

Ford is moving from 14 to nine layers of management, which should speed up product development and keep the company lean.
Image: Cars for sale at a Ford dealership in Queens, New York, on May 20, 2019.
Cars for sale at a Ford dealership in Queens, New York, on May 20, 2019.Spencer Platt / Getty Images

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By Paul A. Eisenstein

Ford is facing an assortment of challenges, including sales and share declines in the U.S. and China, its key markets. It’s been hit hard by President Donald Trump's trade wars, and this week the auto giant confirmed it is axing 7,000 white-collar jobs, with some questioning whether further cuts could follow.

“We still have a lot of work to do in the coming months," Ford Chief Executive Officer Jim Hackett said in a Sunday night e-mail to employees that revealed the planned cutbacks.

The reduction will impact 2,300 salaried workers in the U.S. — including 1,500 who left voluntarily last year — Ford told NBC News. The vast majority of the losses will come in Europe and other markets where Ford is struggling.

All in, the numbers are half of the 14,000 job cuts announced by General Motors last November for North America alone, with a large share of those coming at five factories GM plans to shutter, including two U.S. assembly lines. There are no major blue-collar cuts, nor plant closures, in the works, Joe Hinrichs, Ford’s president of automotive operations, told NBC News last month.

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Ford’s announcement is part of the “Smart Redesign” plan Hackett initiated after being named CEO in a management shake-up two years ago. It’s expected to generate $11.5 billion in total savings, with the reduction in force alone worth about $600 million annually.

Ford officials assert the move is more than just a matter of cost-cutting, however. “To succeed in our competitive industry, and position Ford to win in a fast-changing future, we must reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work, and cut costs,” Hackett wrote.

Smart Redesign will see Ford move from 14 to nine layers of management by August, something it expects will speed up, among other things, product development, Hinrichs said, letting it operate more like its leanest competitors.

Ford clearly needs to move faster as it shifts its fundamental business strategy. Last year, the automaker announced it would drop virtually all of its sedans, coupes and hatchbacks, with the still-popular Mustang the key exception. It has also increased to $11 billion the money it plans to invest in its electrification program, with its first long-range battery-electric vehicle, a high-performance crossover, set to debut this year. Add to that another $500 million it is investing in battery-car company Rivian.

That start-up is one of an assortment of new partnerships launched under Hackett. Ford announced the first of what it expects to be numerous joint ventures with Germany’s Volkswagen in January. And it is rapidly expanding its relationship with India’s Mahindra & Mahindra, as well.

While the first VW deal focuses on commercial vehicles, the partners also hope to share in the development of electrified and autonomous vehicles — the two areas of its business the Detroit automaker will base out of its old Michigan Central depot. Ford has been ranked as one of the tech leaders in the development of self-driving vehicles and, along with other high-tech projects — like the ability to use Amazon’s Alexa to order food from a Ford vehicle — it expects mobility services to generate a key part of its revenues in the future.

Or so it hopes. It is far from clear when autonomous vehicles and related services will become a reality, one of the reasons that analysts have been wary of Ford’s stock for the last several years. But investors have begun to warm back up in recent weeks, driven in part by stronger-than-expected earnings and a clearer sense of Hackett’s corporate strategy.

Ford still faces plenty of challenges. It was hit hard by the Trump tariff on imported steel and aluminum last year, for one thing. And the U.S.-China trade tiff could make things worse in that country’s huge car market. And vehicle sales in the U.S. market continue to slow after a decade of near-continuous growth.

So, “being proactive to extract profit from cost savings” is a critical move, according to Morgan Stanley analyst Adam Jonas. “We view such savings as critical to offset the headwinds of a slower top line, rising compliance/technology costs and price pressure(s),” he said.