Ford Motor Co. announced Monday, Aug. 23, that it will cut a total of 3,000 salaried and contract jobs, with the cuts targeting mainly North America and India. The move indicates that the company is restructuring to catch up with Tesla in the development of software-driven electric vehicles.
Ford CEO Jim Farley (Jim Farley) has said for months that he thinks the automaker has too many employees. And as the auto industry shifts to electric vehicles and digital services, Ford doesn’t have enough employees with the skills it needs.
In a joint email to all employees, Farley and Ford Chairman Bill Ford wrote, “We are cutting jobs and reorganizing and streamlining functions across our business units. You will hear more details from the leaders in your business area later this week.”
Like other established automakers, Ford employees are primarily engaged in traditional fuel vehicle production. Looking ahead, Farley has laid out a strategy for Ford to develop a range of new electric vehicles. Like Tesla, Ford hopes to generate more revenue through services that rely on digital software and connectivity. Tesla’s pre-tax margins have outpaced Ford’s this year, and Farley has always been outspoken about the need to cut costs.
Building such a future will require changing and reinventing every aspect of how we’ve operated for more than 100 years, which will require staying focused, clear on purpose and speed,” Ford and Farley wrote in the email. And, as we’ve discussed in recent months, it means redeploying resources and addressing our cost structure, which is not competitive with traditional and new competitors.”
Rising battery, raw material and transportation prices have put additional pressure on Ford and other automakers. Despite this, Ford is sticking to its full-year profit forecast, despite a $3 billion increase in the company’s operating costs due to inflation.
Ford has begun to divide its operations into electric, internal combustion engine and commercial vehicle divisions. About 2,000 salaried jobs and 1,000 contract jobs will be affected, and it’s not clear what percentage of jobs will be cut in each division. Farley had said in July that the internal combustion engine division would cut costs. But Ford said Monday that the cuts would affect all divisions of the company.
Ford’s rival General Motors Corp. moved to cut 14,000 jobs at the end of 2018 as it prepares to accelerate its electric vehicle strategy. Ford, GM and Stellantis’ North American operations will face new workforce challenges next year as they begin contract negotiations with the United Auto Workers (UAW), which represents employees at the Detroit automaker’s U.S. plants.
UAW leaders are concerned that electric vehicles will mean fewer manufacturing jobs and more jobs will be dispersed to non-union battery and electric vehicle hardware plants.
Ford isn’t the only auto company to lay off workers in recent weeks, either. Rivian announced a 6 percent layoff, Ford-backed startup Argo AI laid off about 150 people and Tesla fired employees who helped train the Autopilot AI system.
