Stock prices of Ford Motor Company have been sliding consistently in the past three years, falling considerably behind Tesla and General Motors. To combat this downswing and reinstall investors’ faith, the Ford Motor has decided to boost profits by reducing their global workforce by nearly 10%, according to the insiders of the company who have been briefed about the plan. Though the plan also includes fortifying the profits at other underperforming aspects of the core business and investing aggressively for new technology, reduction in workforce now seems inevitable.
Plan to Reduce Expenses by US$3.0 billion in 2017
As the automotive sales drop in the U.S., the proposed plan by the CEO Mark Fields is to achieve US$3.0 billion cost cutting this year itself, which should reflect as increased profitability in 2018. This move is primarily targeting the salaried employees, who are nearly 200,000 in number, half of whom work in North America and rest in other parts of the world. However, it is unclear whether the cost cutting would be achieved by reducing headcounts or by decreasing hourly workforce at the factories.
Influence from the White House
President Donald Trump has frequently pointed to automotive companies to add jobs in the U.S., which in turn means pulling back on the production units in Mexico. Ford has already scrapped a Mexican factory that was under construction until recently, promising to add 700 jobs at the Michigan facility with the saved money.
It must be noted that Ford Motor has poured significant investments into a number of new technology, such as US$4.5 billion program for electric-vehicle and development of autonomous-car concept. While these projects will boost profitability for the company in a long-term, workforce reduction is expected to boost the stock market almost immediately.