Ford is reportedly eyeing cutting down its costs as the company is shifting towards electric vehicles. According to Bloomberg, the automaker plans to slash 8,000 salaried workers. It is almost a quarter of its workforce, which will reduce $3 billion in operational costs by 2026.
Furthermore, the cuts will be coming from Ford Blue, the company’s legacy internal combustion engine business. Earlier this year, Ford split itself into two entities, with Ford Blue covering ICE vehicles and Ford Model E focused on electric vehicles and software projects. At the time, Ford said that Ford Blue would generate the revenue that would help power Ford Model E to develop new and innovative products.
But now, it seems like Ford Blue will have to generate those revenues with far fewer employees. The cuts, which Bloomberg reports have not been finalized and could still change, are likely to come in phases, starting as soon as this summer. Ford employs around 31,000 workers in the US, where the bulk of the cuts is expected to fall. According to the Detroit Free Press, Ford CEO Jim Farley sent a video message to employees Thursday morning, in which he didn’t deny that layoffs were coming and reiterated the goal of reducing operational costs at the company.
Director of corporate and public policy communications at Ford, T.R. Reid said, “We’re reshaping our work and modernizing our organization to deliver on the transformation plan we call Ford+, which includes leading in the disruptive and exciting new era of connected, electric vehicles.”
Further added, “We’re reshaping what is happening across all of our automotive business units and the entire company. And we’ve laid out clear targets for improving our cost structure along the way, so we’re lean and fully competitive with the best in the industry.” Ford has said it intends to spend $50 billion on its shift to electric vehicles. When he announced the restructuring, Farley said that Ford Blue must be a “profit and cash engine for the entire enterprise.”
But profits have been tough to come by amid a broad shift in the auto industry. Ford lost $3.1 billion in the first quarter of 2022, mostly due to a steep drop in value in its stake in EV company Rivian. The company’s operating profit was $2.3 billion, down from $3.9 billion in the first quarter of 2021. Ford has said that cutting staff is key to boosting profits. And thanks to rising material costs, its hottest selling vehicles, like the Ford Mustang Mach-E, are struggling to meet their own margins.
Credits- The Verge