A spokesman for the company confirmed on Tuesday, June 27, that Ford began notifying some of its salaried workers the previous day that job cuts were coming.
The planned layoffs are expected to be concentrated among the company's host of engineers spread out across all three of its business units: Ford Blue, its traditional internal combustion engine division; Ford Model E, its electric vehicle manufacturing unit; and Ford Pro, its commercial vehicles and services division. (Related: Ford halts production and shipping of F-150 Lightning EV due to unspecified battery issue.)
Ford's managers held meetings on Monday, June 26, informing employees that layoffs were coming and that affected teams have permission to work from home for the rest of the week. Affected employees are expected to be notified by the end of the week.
The layoffs are part of the company's "Ford Plus" growth plan. Announced in 2021, this multi-year-long restructuring effort is designed to massively reduce costs.
"Delivering our Ford Plus plan for growth and value creation includes increasing quality, lowering costs, investing in our priorities and adjusting staffing to match the capabilities we need," said the company in an emailed statement. "People affected by the changes will be offered severance pay, benefits and significant help to find new career opportunities."
"Delivering on the plan includes adjusting staffing to match focused priorities and ambitions, while raising quality and lowering costs," said Ford Corporate and Public Policy Communications Director T.R. Reid, in a statement that hews closely with Ford's own official statement on the job cuts. "The actions we're taking this week in the U.S. and Canada are mostly – but not only – related to engineering roles."
Ford is not the only automaker reducing its headcount as it realigns its business priorities to focus more on manufacturing electric vehicles. Jeep parent company Stellantis in April began a voluntary buyout program for about 33,500 employees, while General Motors conducted a similar employee buyout program that was so massive it is expected to cost the company nearly $900 million.
This is only the latest round of layoffs for Ford's global business over the past year, including a 3,000-person reduction in the U.S. last summer and a nearly 4,000-person job cut for its European operations initiated earlier this year.
These job cuts caused Ford's employee headcount last year to drop by about 10,000 people to 173,000 employees globally.
Ford's annual costs are between $7 to $8 billion, which executives noted is far too high compared to its rival automakers. CEO Jim Farley himself noted that the company has more work to do to reduce costs as its main business, Ford Blue, is massive and significantly less efficient than the similar divisions of its competitors.
"We can cut the cost, we can cut people, we can do that really quickly and we'll do whatever we need to," said Farley.
Farley further noted that its goal now is to boost the profit margins for its internal combustion engine division as it works overtime to offset the lack of profits coming in from its growing EV wing. Farley said the profitability of EVs is expected to be lackluster for several years as Ford continues to scale up output and work to reduce battery costs.
He warned that making an EV might only start costing as much as making an internal combustion engine vehicle after 2030. Ford already expects to lose $3 billion from its EV business in 2023 just as its internal combustion sector works overtime to help keep earnings afloat.
In its latest quarterly filing in May, Ford said it expected to incur between $1.5 billion to $2 billion in charges in 2023 "primarily attributable to employee separations and supplier settlements."
Labor issues are also expected to be major obstacles to Ford's plan to reduce operating costs. The layoffs come just weeks ahead of the scheduled start of negotiations with the United Auto Workers (UAW) union over a new four-year labor contract for Ford's unionized hourly factory workers.
Ford, Stellantis and General Motors expect to face an especially tough round of talks with a higher-than-usual risk of a strike thanks to the election of new, more militant leadership in the UAW.
Learn more about the state of the American economy at MarketCrash.news.
Watch this clip from Fox Business as "Barron's Roundtable" host Jack Otter interviews Ford CEO Jim Farley about the transition to more electric vehicles.