How Is This Not A Recession? Ford To Slash 10% Of Global Workforce

Having admitted in March that "used car prices will drop for years" and amid near-record inventories,  a so-called 'plateau' in car sales, and soaring auto-loan losses, WSJ is reporting that Ford is planning substantial cuts to its global workforce amid CEO Mark Fields’s drive to boost profits and address the auto maker’s sliding stock price, according to people briefed on the plan.

With near record high inventories of 3.9 million vehicles...


Demand tumbling...




and a flood of off-lease vehicles set to send prices tumbling, as Morgan Stanley recently pointed out, we're just getting started as they see used car prices dropping by up to 50% over the next 5 years.

It appears Ford has seen the light of survival in this non-recession, recession... (via The Wall Street Journal)

The move comes as Ford targets $3 billion in cost cuts for 2017, a plan aimed at improving profitability in 2018 even as U.S. auto sales plateau.


Ford’s share price has suffered during Mr. Fields’s three-year tenure, and the company’s market value has slipped far behind Tesla and General Motors.

The job cuts, expected to be outlined as early as this week, largely target salaried employees and aim to reduce the global head count by an equivalent of about 10%, these people said.


It is unclear if the plan includes cuts to the hourly workforce at Ford’s U.S. factories and plants that are abroad.

Ford has 200,000 employees globally, half of which work in North America...

One can only imagine what this will do to production, and thus US manufacturing output - still The Fed should hike rates anyway, right? How is this not a recession?

And finally, let's reflect a little on the government's hand in this utter debacle. As a reminder, for those who vehemently believe that Ford did not receive a government bailout...

Although Ford did not receive TARP funds, it did receive government loans. These were critical because banks were not lending during the financial crisis. It requested a $9 billion line-of-credit from the government. In return, it pledged to spend $14 billion on new technologies. (Source: "Ford to Congress: Keep $9 Billion Handy for Us," Politico, December 2, 2008.)


On June 23, 2009, Ford received a $5.9 billion loan from the Energy Department's Advanced Technology Vehicles Manufacturing program. In return, it pledged to accelerate development of both hybrid and battery-powered vehicles, close dealerships and sell Volvo. It upgraded factories in Illinois, Kentucky, Michigan, Missouri and Ohio to produce hybrid vehicles.


Ford used the funds to switch its focus to commercial electric vehicles. In 2016, CEO Mark Fields said, “"We want to become a top player in electrified solutions.” The company wants to lead, “…we can win such as with our commercial vehicles." (Source: "Trump Should Be Asking: Will Ford Pay Off Its Loan Before Moving Small Car Production to Mexico?" Forbes, September 21, 2016.)


Eighty-one percent of the funds went to create new efficiency technologies for gas-powered vehicles. For example, they helped fund Ford's aluminum bodies in the F-series pickups. The Congressional Research Service estimated the loans saved 33,000 jobs. Ford will repay this loan by 2022. (Source: "The Advanced Technology Vehicles Manufacturing Loan Program: Status and Issues," Congressional Research Service, January 15, 2015.)


Many argue that Ford needed the funds to sustain its cash flow during the recession. Ford says it was in better shape than the other two because it had mortgaged its assets in 2006 to raise $23.6 billion. It used the loans to retool its product lineup to focus on smaller, energy efficient vehicles. It got the United Automobile Workers to agree it could finance half of a new retiree health care trust with company stock. By April 2009, it retired $9.9 billion of the debt it had taken out in 2006. (Sources: "Obama Administration Awards First Three Auto Loans,", June 23, 2009. "How Ford Avoided the Meltdown that Hit GM, Chrysler," CNBC, April 9, 2009.)

So to clarify:

  • Dec 2008 - headcount 213,000
  • Dec 2008 - Ford received $9bn line of credit from the government. The Congressional Research Service estimated the loans saved 33,000 jobs. Ford will repay this loan by 2022.
  • May 2017 - headcount 180,000

Money well spent... to lock in a few more voters, eh?

As The Wall Street Journal concludes, deep cuts in the U.S. could trigger political backlash due to the role the auto industry played during the campaign and early tenure of President Donald Trump.