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Ford Needs to do More Than Cut Costs in Order to Restore the Company



The auto industry has been struggling lately with supply gluts and lowered consumer demand. On top of that, Elon Musk and Tesla have been rising up strong as the current dominant force in the industry, overtaking Ford for the second largest U.S. automaker… Ford has been fighting hard to reclaim lost market share, but it seems that the company is struggling enough to cut their global workforce by 10 percent. Will the cost cutting measure restore momentum to the car titan?

Will Ford be Able to Reclaim What They Lost?

In 2015, Ford’s stock reached an all-time high. With Ford shares plummeting and the company losing market share to Tesla, CEO Mark Fields has come under increasing pressure to cut costs and raise stock prices. Now, it looks like Fields is listening, and cutting ten percent of Ford’s global salaried workforce. Is this really the best course of action?

Ford currently employs about 200,000 workers around the globe, with many of those based in the U.S. A 10 percent cut would mean 20,000 jobs would disappear. That’d be a sharp contrast to President Trump’s central promise of increasing manufacturing jobs in the country. Trump convinced Ford to not only keep its Michigan plant in the U.S., but to add 700 jobs to the plant. With Ford keeping the factory here in the states, the company’s costs have risen, weighing down on the stock.

Ford has seen a 35 percent drop in earnings in Q1 this year as the company is faced with declining sales and increased recall costs. Add to that rising costs of raw materials, and a tough situation got worse. Basically, the retail effect is spreading to Ford.

The company is out of touch and has not adapted to shifting market trends. Instead of focusing on in-demand vehicles such as SUVs and pickups, the car marker is sticking to sedans. That’s the same problem many retailers have had as they continue to put up new stores and carry merchandise shoppers aren’t interested in. But cars are much more expensive to produce than shirts, and Ford needs to cut costs somewhere. One other option might be for Fields to start with himself. The CEO has seen his salary raised from $18.8 million to $22.1 million, while Ford’s profits and revenues continue to dwindle.

Watch the news from 41 Action News about Ford's plan to cut 10% of its workforce:

While massive job cuts may boost up share price initially, expect shares of Ford Motor Company (F) to continue DOWN.

Learn how to handle retail stocks from Guy Cohen right here.

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