Why did Ford lay off Employees?
Ford Motor Co. officially announced that it will make the jobs of some 3,000 white-collar and contract employees redundant, with the reduction mostly in the US, Canada, and India. This move is the latest in a series of cost-cutting measures that the company has implemented as it switches to electric vehicles (EVs) of a broad range. According to Ford, around 2,000 of the targeted cuts will be salaried jobs at Dearborn and the remaining 1,000 employees are those working in contract positions from external agencies.
Chief executive of Ford, Jim Farley, stated that the company has too many employees and the existing workforce does not possess the expertise needed to transition to a portfolio of electric, software-laden vehicles. Ford is changing the way it operates and reallocating resources as it adopts new technologies such as creating cutting-edge software for its vehicles, which were previously not essential to its operations.
Ford assembly lines will not be closed as a result of the transition to EVs. The company has taken up the construction of new EV and battery factories.
Ford Sales by Vehicle Type in the US
The company classifies its vehicles into three categories: Cars, Sport Utility Vehicles (SUVs), and Trucks. Over the years, the overall sales of vehicles in the US declined, with the sales of cars being affected the most. Sales of SUVs and trucks gathered momentum due to an increase in demand for the newly launched vehicles under the Ford and Lincoln brands.
Similar to other international automakers, Ford is making a substantial investment in EVs in an effort to catch up with Tesla Inc. in terms of sales. In 2022, Ford introduced a new line of EVs, including the F-150 Lightning, Mustang Mach-E and E-Transit. A total number of 3,008 Ford E-Transit and 1,837 F-150 Lightning vehicles were sold in June 2022. In terms of EV sales in the US, Ford is the largest seller after Tesla. Ford aims at generating half of its global sales from fully electric vehicles by 2030. The company said that it would spend $50 billion through 2026 to develop EVs, targeting global sales of two million vehicles.
Overview of Ford's Operating Costs
In Q3 2022, the operating costs of Ford Motor Co increased to 102.6%. A relatively low ratio would be considered a good sign as the company’s expenses are less than its revenue. In the second quarter of 2022, operating cash flow was $2.9 billion, and adjusted free cash flow was $3.6 billion, with a solid automotive EBIT of $3.3 billion.
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