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Ford will offer severance pay to experienced employees who underperform as it seeks to cut spending by $3 billion amid massive losses.
White-collar workers with at least eight years of experience, who show a pattern of declining performance, can withdraw cash or follow an intensive four- to six-week “improvement plan.”
But those who opt for the improvement plan and fail to improve will not be eligible for severance pay, an internal email reveals.
The plan comes as the Michigan-based manufacturer, which has 30,000 salaried employees in the US, is relocating to cut 3,000 jobs as part of a plan to cut annual costs by $3 billion by 2026.
The company’s latest results also show that it suffered a loss of $827 million in the third quarter of 2022.
Ford CEO Jim Farley has said the company has “too many people in certain places.”
Ford’s stock price has fallen 39% since early 2021 and recently suffered a loss of $827 million
Ford’s stock price has fallen 39 percent since the turn of the year. Shares peaked at $25.19 on Jan. 14, but are currently trading at about $13.26.
The email detailing the new layoff policy, seen by the Wall Street Journalwas sent to the managers on October 4.
It was not immediately clear what benefits employees who chose to lay off would receive.
A Ford spokeswoman said the change, which came into effect on Oct. 1, was meant to simplify the way the company deals with poor performance.
Employees with less than eight years of experience can skip the enhancement course and instead opt for involuntary separation, which includes several benefits, including help with finding another job.
Ford’s cost-cutting plans are part of efforts to fund the transition to electric vehicles.
Ford heir William Ford Junior said the new F-150 must succeed or the company risks failing
The company’s latest earnings report, released last week, shows it lost $827 million in the third quarter of 2022. That compares to a profit of $1.8 billion in the same period last year.
Revenue rose during the most recent quarter, reaching $39.4 billion, compared to the same period last year, but profits suffered due to higher costs and supply chain issues.
Chief executive Jim Farley said in July: “We definitely have too many people in certain places, there’s no doubt about it. And we have skills that don’t work anymore and we have jobs that need to change.’
In September, employees were told that rising interest rates would mean that the lump sum of those who choose to retire will fall by 25 percent from December 1.
The company’s heir, William Ford Junior, also said this year that the company’s $40,000 F-150 “lightning” truck must be a success or the company risks failing.
The financial problems Ford is facing are similar to those faced by other manufacturers trying to move to electric vehicles.
Ford, headquartered in Dearlove, Michigan, has approximately 30,000 salaried employees in the US
Stellantis NV, the parent company of Jeep, Chrysler and more than a dozen other global manufacturers, announced last week that some salaried workers in the US would be given voluntary acquisitions.
Large companies in other sectors are also taking drastic cost-cutting measures as they struggle with an uncertain global economy.
Meta, the parent company of Facebook and Instagram, has announced a workforce freeze and reorganization plan that will reduce its workforce for the first time since Facebook’s founding in 2004.
Mark Zuckerberg, founder and CEO, announced the plans last month. Fellow tech giants Twitter and Google have also rolled out a similar policy.
Bill Ford, Executive Chair of Ford Motor Company, speaks at the debut of the next-generation 2024 Ford Mustang at the North American International Auto Show in Detroit
Ford introduced the gas-powered Mustang at a special presentation in September
Ford hasn’t completely abandoned gas vehicles, and in September it unveiled its next-generation gas-powered Mustang sports car, The Stampede.
The car is aimed at car enthusiasts who not only like the sound of the car’s loud engine, but also enjoy the smell of fuel and fumes that the bosses claim provide comfort to the drivers.
The Stampede made its debut at the Detroit auto show in September at the Huntington Place Convention Center in downtown Detroit.
The new model is Ford’s first redesign in nearly a decade.
The automaker said the seventh-generation Mustang will stick with the car’s internal combustion engine, although many of its competitors are moving their performance vehicles to electric.
While some of its competitors may have abandoned the engine for battery power, it was important for the Mustang sports car to remain a gas-powered vehicle, said Jeff Marentic, Ford’s general manager for family and enthusiast vehicles in North America.