Ford cuts could eclipse GM's, Morgan Stanley says
In the first half of next year, Ford Motor Co. will detail plans to lay off part of its global salaried workforce — and Morgan Stanley analyst Adam Jonas said in a note Monday that the Blue Oval's cuts could exceed the 8,000 salaried employees targeted by rival General Motors Co.
Ford's response: "pure speculation."
"As we have said, we are undertaking restructuring activities that could result in potential EBIT charges of $11 billion, with cash-related effects of $7 billion, over the next five years," Ford spokeswoman Karen Hampton said in a statement. "These actions will come largely outside of North America. This includes the targeted and thoughtful approach we are taking to the redesign of our global salaried workforce.
"All of this work is ongoing and publishing a job-reduction figure at this point would be pure speculation."
Both GM and Ford are in the midst of restructuring their respective business models to prepare for an uncertain future. U.S. sales are plateauing, U.S. consumers aren't buying the sedans that saved the U.S. automakers during the fuel crisis last decade. And both companies, as well as their foreign-owned competitors, are spending billions to develop electric and autonomous vehicles expected to be dominant forces in the next generation auto industry.
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"This is not just a GM or a Ford thing," Jonas wrote. "There are bigger forces at work driving global OEMs to rethink the fundamental idea of supporting increasingly obsolete segments, propulsion systems, and geographic regions."
GM announced a week ago the company in 2019 would idle five plants in North America and lay off 6,000 salaried employees in addition to the 2,250 white-collar workers who took buyout offers. The idled plants, which mostly build cars, would affect more than 14,000 employees — though it's unclear whether those plants would be permanently closed, or if GM will assign new products to the plants in Michigan, Ohio and Ontario.
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The Detroit automaker plans to close two plants overseas next year as well. GM will spend as much as $2 billion on employee-related cuts as part of the nearly $4 billion the Detroit automaker says it could spend on its restructuring efforts. Ford, meantime, announced earlier this year it would spend $11 billion to restructure its global business.
Ford officials in October said they would cut an undetermined number of salaried employees globally, some of which would come out of its North American operations. Ford officials have also said repeatedly that the automaker did not have a glut of line workers. Six of Ford's nine U.S. assembly plants this year operated at above 80 percent capacity utilization, according to data from LMC Automotive. By comparison, half of GM's 12 U.S. assembly plants were operating below 50 percent.
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But Jonas wrote in his note that Ford's $11 billion implies 20 plants and 50,000 employees would be cut. Ford, however, has given no indication of any planned closures or layoff numbers.
"We estimate a large portion of Ford’s restructuring actions will be focused on Ford Europe, a business we currently value at negative $7 billion," Jonas wrote. "But we also expect a significant restructuring effort in North America, involving significant numbers of both salaried and hourly UAW and CAW workers."
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Ford CEO Jim Hackett has said the company plans to trim operating expenses by $25.5 billion over the next several years. It will spend the $11 billion to restructure.
Ford executives haven't offered details on the layoffs because they don't have them yet, several Ford officials have told The Detroit News. The automaker is aiming to flatten management globally based on feedback from individual department leaders. The company expects to have specifics on a headcount reduction by the second quarter of 2019.
The Dearborn automaker is currently on the brink of a new product rollout that would bring new nameplates into the lineup for several years while it phases out sedans from the lineup.
Ford leadership has also promised details — possibly by the end of the year — on partnerships with Mahindra Group in India, and Volkswagen in Europe and South America, as well as restructuring in Europe, South America and China.
Meantime, GM has said its layoffs, sedan cuts and plant idling will save the company $6 billion by 2020. The moves announced last week drew the ire of President Donald Trump and several other local and national politicians. Some have called GM's manufacturing announcements a strategic move ahead of 2019 negotiations with the United Auto Workers.
Read: GM moves put Ford on hot seat
ithibodeau@detroitnews.com
Twitter: @Ian_Thibodeau