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Bigger cuts expected: 23,000 more Ford layoffs needed, analysts say

Phoebe Wall Howard, Detroit Free Press on

Published in Business News

DETROIT -- The math doesn't seem to add up.

Analyst Adam Jonas of Morgan Stanley is among those who say Ford Motor Co. cannot reach its stated profit goals for "Smart Redesign" by laying off just 7,000 salaried workers total worldwide by August.

The company must cut "a further" 23,000 salaried jobs in the near term to fulfill its goals, Jonas wrote Tuesday.

"Ford disclosed that the 7k headcount cuts will save $600 million annually, or an average of $86k per worker," said an investment report dated May 21. "Our (calculations) ... require more than a further 23k salaried headcount reductions."

The latest assessment from one of the most recognized equity analysts in New York might explain the tepid response from Wall Street over the past two days, since Ford CEO Jim Hackett sent an email to employees notifying them of the layoff protocol this week.

While Wall Street rewarded General Motors with a spike in stock price after its job cuts, Ford value has remained static. It closed at $10.29 a share on Friday and closed Tuesday at $10.24.

 

A Ford spokesman did not respond to a request for comment.

"The bottom line is that Ford's announced job cuts are absurd," said market analyst Jon Gabrielsen, who advises automakers and auto suppliers. "No one who analyzes the Ford situation believes that 7,000 job cuts remotely scratches the surface of what will be required for Ford's long-term longevity."

He added, "Adam Jonas, the most respected analyst in the business, estimates that Ford will need to cut an additional 23,000 salaried workers through 2022, for a total of 30,000 since late 2018. My own estimate, arrived at separately and before his report came out, indicated an additional 22,000 cuts would be needed."

This week, some 500 workers in metro Detroit are being told of involuntary layoffs in finance, product development, manufacturing and purchasing during meetings with supervisors over a 72-hour period. More workers in information technology and human resources will be notified about layoffs in coming weeks, Ford officials said in emails to employees.

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