Ford Motor Co. (NYSE: F) management said it would cut 3,000 jobs. None of these appear to be at its factories. White collar workers and contractors got hit. The figure represents a tiny part of the manufacturer’s global worker count. As the car industry hits more headwinds, additional cuts may be contemplated.
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Ford’s evolution into an electric car company was cited as a reason for the layoffs. Ford wants to be leaner as it moves out of the gasoline-powered vehicle sector. It already has carved the parent company into two pieces. CEO Jim Farley said people cannot work on two businesses. They require “different mindsets,” according to a New York Times interpretation of his viewpoint. That is an oversimplification, since the two types of vehicles share so much in common. Maybe he just wanted an excuse for making his workforce smaller.
A few things stand out about the Ford job cuts. The first is that “efficiency” may be the reason Ford made the decision. However, the economy worldwide is on the brink of a recession (or one already has started). U.S. gross domestic product will contract, and the same will be true in Europe. While China’s GDP may not shrink, the slowdown that has begun signals that its economy has started to tank.
One hard and fast rule about recessions is that car sales suffer. They are too large a portion of household costs for this not to be true. Ford’s U.S. sales have risen recently. A sharp reversal of GDP improvement will end that. The other rule about recessions is that car companies cut workers.
One advantage for Ford and other car companies is pent-up demand, triggered by kinks in supply chains. Many models are barely available, and people have to wait months for some vehicles they want to purchase. Recessions change behavior from “want” to “can’t afford.” The average age of a car on the road in the United States is 12 years. A hard hit to the economy will lengthen that.
Ford may say it has continued to seek efficiency and job cuts are part of that. However, efficiency has been joined by economic trouble, which is a bad marriage of problems.
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