James Farley says change is coming.
the ford (F) – Get Ford Motor Company report The CEO acknowledged on the automaker’s second-quarter earnings call that “we have absolutely too many people in some places, there’s no question about that.”
Ford recently reported higher-than-expected earnings in its latest quarter. At the same time, it is preparing to lay off 8,000 employees, or nearly a quarter of its American workforce, in order to reduce its operating costs by $3 billion by 2026, according to Bloomberg News.
The cuts are focused on the company’s internal combustion engine unit. Farley said “cost cutting will happen in our ICE business because that’s primarily what Ford is doing today.”
As the company increasingly shifts to electric vehicles, “we have skills that no longer work,” he said, according to a transcript of the earnings call. “We have jobs that need to change.”
The battery electric vehicle unit, Ford Model e, is seen as the automaker’s long-term future, with the launch of vehicles like the Ford Mustang Mach-E, F-150 Lighting pickup and many more. others to come.
Electric vehicles are also the long-term future for most traditional automakers, and some analysts believe those other companies will lay off workers as well.
Timothy Johnson, a professor of energy and environmental practice at Duke University, said he wouldn’t be surprised to see more layoff announcements as “automakers shift their engineering work from improving the performance of internal combustion engines to developing electric powertrains as they transition. to electric vehicles.
“A state of transition”
“Engineers, of course, can retool their expertise, but that takes time and will no doubt be difficult for many who have spent decades developing that knowledge and intuition,” he said. “Automakers may just find it easier to hire new talent.”
While retraining assembly workers should be easier, Johnson said “electric powertrains have far, far fewer parts than internal combustion engines, and electric vehicle production can manage with one hand.” -of smaller work”.
“The auto industry is in a state of transition,” said Brian V. Larson, professor of marketing at Widener University. “Ford’s decision to redeploy resources to meet the future is unlikely to be an isolated incident. Other traditional automakers will also adapt.”
While the future looks bright for electric vehicles, Larsen said internal combustion engines still have their place.
“Many environments and applications are even better suited to these engines,” he said. “And with continued advancements like renewable fuels and innovative improvements in internal combustion engine design, they’ll be around for a while.”
“New talents and leadership”
Ford apparently feels the same way, as Farley told analysts that Ford Blue, the company’s internal combustion division, is being driven by an “increased emphasis on our ICE and hybrid products.”
“We’ve added new talent and leadership to drive the performance and focus of our trucks, our excellent family lineup and the passionate vehicles we’re so proud of,” he said. “We unveiled new vehicles like the Bronco Raptor, the Bronco Everglades, the F-150 Raptor R, which my kids think are great.”
The issue of the changing workforce is a source of concern for labor leaders.
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In an interview with The Associated Press, Joe Curry, president of the United Auto Workers, said that while the UAW can’t organize workers at the new electric vehicle battery plants that will supply the Detroit Three automakers, the future of the union would be seriously in doubt.
“Locking in this kind of new technology will be critical,” Curry said. “Everyone depends on what happens at the end of this negotiation.”
‘Great bad feeling’
Admittedly, the overall economic picture is somewhat gloomy.
Last month, Tesla (TSLA) – Get the report from Tesla Inc. CEO Elon Musk has warned of impending job cuts and said he has “super bad” feelings about the global economy.
On July 26, General Motors (GM) – Get General Motors company report released weaker-than-expected second-quarter results and said it would slow hiring and cut spending as it braced for what could be weaker demand in the final half of the year.
Edward Moya, senior market analyst for the Americas at Oanda, noted that “automakers are looking at a weakening consumer given the weakening macro environment.”
“Everyone was ramping up production due to the pandemic and increasing investment in electric vehicles, but now we’re going to see much weaker demand as the economy heads into at least a mild recession,” he said. he declares.
Booming EV Jobs
The statistics favor the clean energy sector.
The U.S. Department of Energy’s US Energy and Jobs Report found that jobs in the energy sector increased last year by 4% from 2020, outpacing the overall employment in the United States, which increased by 2.8% over the same period.
Jobs in electric vehicles jumped an impressive 26.2%, or 21,961, in 2021, while jobs in fossil fuels accounted for most of the jobs lost in fuels.
Louis Navellier, founder of fund manager Navellier & Associates. does not believe that other automakers will follow Ford’s lead.
“I don’t expect other automakers to cut jobs unless they abandon their dealership model,” he said. “Ford split its business into EV and internal combustion engine divisions. GM didn’t do that.”
Navellier noted that Ford recently struck deals with Chinese battery maker CATL.
Under an agreement, CATL will supply lithium iron phosphate batteries for Ford’s North American Mustang Mach-Es next year and the North American F-150 Lightning in early 2024.
Farley told analysts that Ford has reached an agreement with CATL “on strategic cooperation for global battery supply as well as agreements for the direct supply of critical battery raw materials to the United States, Australia, Indonesia and in other places”.
“What’s significant about CATL’s announcement is that Ford will manufacture the Mach-E with iron phosphate batteries,” he said, “which are heavier and less efficient than lithium batteries. -ion currently supplied by LG Chem”.
The CATL deal is a big deal, Navellier said, “because there just isn’t enough lithium, nickel and cobalt available to make more lithium-ion batteries. Iron phosphate batteries are also safer and do not ignite.”
“Because of the CATL deal, Ford is really serious about converting to electric vehicles, as CATL will supply both iron phosphate and lithium-ion batteries to help Ford overtake GM in electric vehicles.” , did he declare.
Farley told analysts that “there is so much we can do to change the profit profile of these vehicles.”
“The biggest thing we need to address in all of this is battery cost, and we can’t wait to explain all of that to you,” he said.
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