Michigan-based automobile giant Ford Motor Company (NYSE:F) may announce a substantial reduction, to the tune of 10%, in its workforce this week, reported the WSJ. Primarily, salaried workers in North America and Asia would be laid off, reported Reuters.
Shares of the second largest US-automaker have been shedding value since mid-2014, despite a resilient US auto industry. Now, when the industry is showing signs of weakness after more than five years of strong performance, the decision to reduce staff would clearly be an attempt to safeguard profits.
And Ford does need that or it’ll be nearly impossible to fulfill its cost reduction commitment of nearly $3 billion, which can virtually stem the decline in the company’s stock considering it generated $3.7 billion in net income over the past year and pays an attractive 5.4% dividend yield.
The decision would come on the heels of a quarter, identified as one of the toughest by CFO Bob Shanks — profit was down by more than a third compared to the year-ago quarter, primarily due to the launch of new F-150 back then.
While Shanks said the rest of the year would remain flat against the previous fiscal, changed market dynamics with the US auto sales taking a turn from a record-growth phase could bring the company’s North America margins further down further after a significant drop in the most recent quarter.
Ford hasn’t confirmed yet, saying “we have not announced any new people efficiency actions, nor do we comment on speculation”. But it wasn’t an outright denial either — “Reducing costs and becoming as lean and efficient as possible also remain part of that work”, said the company.
Interestingly, while the management has been put under extreme pressure to improve the profitability and stem the continued decline in the stock price, the company insiders mostly sold shares over the past year.