Ford Motor Co is Cutting 3,000 Jobs as it Transitions to Electric Vehicles, Software and Digital Services
【Summary】Ford Motor Co is undergoing one the biggest transitions in the company’s history with plans of building more software-defined electric vehicles. The automaker plans to sell 600,000 electric vehicles by 2023 and 2 million by 2026. But to reach its electrification targets over the next several years, Ford plans to reduce costs and become a much leaner company.
U.S. automaker Ford Motor Co is undergoing one the biggest transitions in the company's history with plans of building more software-defined electric vehicles. The automaker plans to sell 600,000 electric vehicles by 2023 and 2 million by 2026. But to reach its electrification targets over the next several years, Ford plans to reduce costs and become a much leaner company, which will result in job cuts.
Ford CEO Jim Farley announced the first of these job cuts on Monday in an email to staff. Farley wrote the company is laying off roughly 3,000 salaried and contract employees, mostly in North America and India. The moves are part of Ford's restructuring plans to better compete with EV leader Tesla and boost profits.
"We are eliminating work, as well as reorganizing and simplifying functions throughout the business. You will hear more specifics from the leaders of your area of the business later this week," Farley and Ford Chairman Bill Ford wrote in the joint email to staff.
Farley expressed recently his concerns that the automakers had too many people, and that not enough of its workforce have the high-tech skills required as the auto industry shifts to electric vehicles and connected services, which will help Ford generate additional revenue after a vehicle is sold.
To further reduce the production costs of its EVs, Ford said it will use new EV battery chemistries and has already secured contracts for 60 gigawatt hours (GWh) of annual battery capacity to deliver its 600,000 EV target globally by late 2023, which would make Ford the second-largest U.S.-based producer of electric vehicles behind Tesla.
Ford is adding lithium iron phosphate (LFP) cell chemistry to its portfolio for the first time, alongside its existing nickel cobalt manganese (NCM) chemistry. This will create more capacity for high-demand products, such as the F-150 Lightning and Mach E SUV. It also provides its EV customers with reliable long life batteries, according to Ford.
Ford said it also sourced approximately 70% of the battery cell capacity it needs to support an annual global run rate of more than 2 million EVs by late 2026.
However, selling millions of EVs each year with expensive batteries will likely affect Ford's profits margins in the short term since a big chunk of Ford's income right now comes from selling a lineup of gas-guzzling, full-size pickups and SUVs. But if the automaker wants to transition to electrification to compete with its rivals, including General Motors, Ford will need to become a much leaner company.
In June, Farley said that the cost to manufacture the Mustang Mach-E electric SUV has become so expensive that it's wiping out all of profits the company expected to make with the EV.
"We actually had a positive bottom line profit when we launched the Mach-E, commodity costs have wiped that out," said Chief Financial Officer John Lawler in June at the Deutsche Bank Global Automotive Conference in June.
Earlier this month, Ford raised prices for the F-150 Lightning electric pickup due to inflation. The automaker cited significant material cost increases and other factors for the price hikes of nearly 20% on F-150 Lightning models.
The automaker said prices for the 2023 F-150 Lightning will jump between $6,000 and $8,500 depending on the model. The entry-level F-150 Lightning Pro now starts at $47,000, which is up from the previous MSRP of $39,974.
The price changes will take effect with the opening of the next wave of F-150 Lightning orders, which were recently closed due to higher than expected demand for the battery-powered truck.
Ford originally planned to build 40,000 F-150 Lightning a year, but stronger than anticipated demand led the automaker to triple its planned production. Ford received roughly 200,000 preorders for the electric truck before it had to close the order banks in Dec 2021, to ensure that customers wouldn't face extended wait times.
For now aims to build 150,000 Lightning trucks a year at the newly retooled Rouge manufacturing complex, which will only build electric vehicles. Ford is also building a second and much larger electric vehicle production facility in Tennessee.
In March, Ford announced it was setting up a new division named "Model e" that will focus solely on its electric vehicle business. The plans include running Ford's EV business separate from its legacy combustion engine business and commercial business to better compete with rival Tesla, which is now the world's most valuable car company.
Ford said it will boost spending on electric vehicles to $50 billion through 2026 which is up from the $30 billion the company initially planned to invest in EVs.
Ford's recently announced job cuts come just two months after the automaker said it will add thousands of manufacturing jobs in the U.S.
On June 2, representatives from Ford and the United Auto Workers (UAW) announced plans to add more than 6,200 new manufacturing jobs in the Midwest. The plans include converting nearly 3,000 temporary UAW-Ford workers to permanent full-time status at the automaker. In addition, all hourly employees will receive healthcare benefits on the first day of employment.
Ford is investing another $3.7 billion in its manufacturing facilities in Ohio, Michigan and Missouri to prepare them to produce new vehicles.
Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.
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