Ford announces 10 per cent white-collar job cut in North America and Asia

Ford Motor Company has announced plans of cutting some 1,400 white-collar jobs in North America and Asia. The company will offer voluntary early retirement and other financial incentives to managers and other non-production workers in a bid to shore up its sagging stock price.

Ford announces 10 per cent white-collar job cut in North America and Asia

Production remains safe

According to Reuters, the news came as part of the 20,000 job cuts that Ford could be considering. While Reuters claimed a variety of news sourced were airing the large-scale redundancy plan to be announced during the week, Ford has yet to make any specific announcements to affirm these rumours.

Indeed, to prevent wide-scale panic that could very well result in a rush to sell, exerting further downward pressure on its stock, Ford was quick to delineate the extent of its cuts. Accordingly, as cited by Reuters, a large part of salaried workers would not be affected and jobs in Ford’s South America and Europe units were safe. Additionally, those in product development and production are also out of harm’s way, just as the staff of the Ford Credit unit.

About two-thirds of the buyout offers will be in North America, the rest in Asia.

According to Ford spokesman Mike Moran, the company will offer generous financial incentives, including early retirement offers, and hopes to hit the redundancy targets through coming to mutually acceptable terms with volunteers.

The cut would amount to roughly 10 per cent of Ford’s white-collar staff of 15,000 and would cut labour costs by about the same margin.

Plummeting shares

Ford’s shares have been in an almost monotone fall since the start of the May 16 trading session. By 3 PM Wednesday (May 17), the ticker fell from $11.07 to $10.7, after which, possibly as a result of Ford’s announcement, it bounced back and has been fluctuating around the $10.79 mark.

This rebound is still lacking against the $12.70 on March 16, since when the company has been dropping heavily, to under the previous 4-5 year low-point of $11.34 on November 4, 2016.

As the company’s ticker is at a five-year low, Ford has understandably entered saving-mode to cut costs and shore up its share price.

Newswire USA Today has quoted an interview with Ford CEO Mark Fields as saying the company is considering major strategic changes, including:

  • Scaling back car production, as consumers gravitate towards crossovers, SUVs, and pickups;
  • Paying down Ford’s debt “so it has a bigger cash cushion going as the US auto industry heads into a period of slower new vehicle sales”;
  • Exiting businesses or parts of the world, such as India, where Ford is underperforming;
  • Creating new companies or new lines of business, aiming to become a larger player in autonomous vehicles and carsharing.

According to Ford’s 2016 annual report, North America, a record profit in Europe, and second-best profit in the Asia-Pacific contributed the most to its automotive results, where the company gained pre-tax profit of $9 billion, $1.2 billion, and $627 million, respectively. Additionally, the annual report repeatedly emphasises these three region’s importance to its overall profitable operations—which might raise the question as to why the company is looking to cut jobs in two of its three most profitable markets.

While it has not been announced where the job cuts are going to hurt the most in Asia, India could be divined as a primary target from the musings of CEO Fields. On the other hand, it might target its much smaller operations across the ASEAN —by which Ford means Indonesia, the Philippines, Thailand, Vietnam, and Malaysia.

Within the ASEAN, Ford’s main production hubs are located in Thailand, with two manufacturing plants in Rayong. These plants, according to the Bangkok Post, have a combined capacity of 315,000 units per year.

Ford produces the Ranger pickup, Everest, and EcoSport sport-utility vehicles in Thailand, as well as the Fiesta and Focus hatchbacks. The Rayong plants’ products are exported to 180 markets worldwide.

Ford has one assembly plant in Vietnam, with a capacity of 20,000 units a year. The plant, located in the northern province of Hai Duong, is a 75-25 joint venture between Ford and Song Cong Diesel Company.

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By Tom Nguyen