Ford Could Cut Thousands of Jobs — or More

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Ford Motor Co.’s (NYSE: F) troubles continue. CEO Jim Hackett recently hosted a meeting of the manufacturer’s senior management. He said Ford may set joint ventures with other car companies as a way, among other things, to cut costs. He also said tariffs could cost Ford $1 billion at the bottom line. As a means to reach his goal of an $11 billion structuring lower expenses, Hackett will have to cut thousands of jobs, perhaps tens of thousands.

The ventures Ford is seeking with Volkswagen and India’s Mahindra & Mahindra would cut both product development and factory costs. Layoffs are usually a result of manufacturing efficiency, at least at companies that are not experiencing increases in sales. Hackett also can do the math. Unless he cuts large numbers of people, he cannot drag down Ford’s costs.

Hackett said that tariffs will cost Ford hundreds of millions of dollars in additional metal costs. There is no way Ford can offset these.

Ford is trapped between its present and what Hackett says will be its future. That future is full of electric and autonomous cars. Hackett’s challenge is that Ford is no better off in the race to control the future of cars and trucks than most, if not all, of its major competitors. Additionally, Ford is up against tech companies and start-ups moving in the same direction. Firms like Alphabet’s Waymo self-driving car operation already have products that it may take Ford years to match. Smaller software companies also have shown technology that will contribute to the cars of the future.

Wall Street does not believe that Hackett can make the journey he has mapped. Ford’s shares are down over 25% this year, while the S&P 500 is up nearly 8%. Hackett has run out of places to turn.

Normally, large companies with significant cost problems look to worker headcount as the only solution. Ford is close to that point.