Ford: Job cuts had to be slow

DETROIT — Ford Motor Co. handed the reins to Jim Hackett so it could become more agile and decisive.

But the global reorganization he began has been anything but quick. What details dribbled out perplexed analysts and exasperated employees, many of whom worked under a cloud of uncertainty for months before finding out whether they would still have a job.

Last week, which marked Hackett's second anniversary as CEO, the hard numbers finally came in, and they included layoff notices for 500 U.S. workers. By September, Ford says it will have shed 7,000 salaried jobs globally, or about 10 percent of the white-collar work force, saving $600 million a year.

More important than the financial savings, executives insist, is that by getting leaner, Ford can move faster. And they are adamant that getting to this point required a lengthy process to yield meaningful benefits for the company.

"This was a very challenging time for us because you want to minimize the anxiety in the work force, but at the same time, you want to get it right," Kumar Galhotra, Ford's president of North America, said in an interview last week. "In the past, our industry has done a lot of these top-down, x-number-for-y-departments kind of plans.

"If you simply take a number and target it in a very short period of time, you're not fundamentally changing the efficiency of the organization," Galhotra said. "The end result is those inefficiencies stay there, and you don't make a long-term impact on the organization."

Ford waited to divulge specifics about the cuts because it didn't have a predetermined number, Galhotra said. Instead, the company had managers at every level of each organization — including manufacturing, product development and information technology — determine how their teams should best function.

Hackett told employees in an email last week that one result of his "smart redesign" of Ford is more direct reports for managers but fewer layers of management — nine, down from 14.

Executive Chairman Bill Ford described the process as painful but necessary to get to "fighting shape." Ford, speaking to reporters on the sidelines of the company's City of Tomorrow event in Los Angeles, said there will always be frustration when disrupting employees' lives but that minimizing it was one goal of the redesign.

"We took great care with it," he said. "We spent a lot of time explaining to employees and getting all their input, each departmental input. The pushback is, 'Why did you drag it out so long?' The reason we did that is just so we could take the proper care."

Galhotra pointed to his North America team as an example of how Ford Motor wants to "fundamentally change" how it operates.

After Galhotra was promoted to his position last year, he took over the 11th floor of Ford's headquarters, converting executive offices into "franchise rooms" for individual nameplates.

The franchise rooms — there are 17, up from 13 — have moved to the nearby Regent Court office buildings, where Ford's marketing operations are based. They take up three floors in two towers.

Each Wednesday, Galhotra's team devotes one hour to each room and pores over issues from vehicle profitability to availability of specific trims or powertrains.

"With any big company, you run the risk where managing the calendar gets in the way of making decisions," he said. "If a team needs to talk to product development or IT, just aligning those calendars can delay a decision by a week or three weeks. We've committed to our teams that we as a leadership team are here for them. It's a big commitment, but it reduces bureaucracy and speeds up decision-making."

The question nagging at Ford's shareholders and remaining employees is whether the cuts, which the company says will include 800 layoffs in the U.S., go deep enough. Morgan Stanley analyst Adam Jonas suggested more layoffs might be necessary, but Ford pushed back strongly against the idea.

In a note to investors, Jonas, who has butted heads with Hackett on earnings calls over a lack of transparency around Ford's plans, said the company might need to eliminate "more than 23,000" additional salaried jobs.

Ford, in a statement, said it was in the final stages of reorganizing its salaried work force and "working across the company in many other ways to reduce costs and become more fit." The automaker said the effort amounts to more than "simply a restructuring or cost-cutting plan," calling it "a complete redesign of our business now and in the future."

Bank of America Merrill Lynch analyst John Murphy last week said Ford's announcement "illustrates that the company's ongoing efforts are very much concrete, and should start to be better appreciated by the investment community."

Ford shares have risen about 30 percent since the start of the year, topping $10 after the company posted strong first-quarter earnings before sliding back to single digits last week. Hackett has called 2019 a "year of action," in which many of his plans will start to bear fruit.

That applies to the job cuts, too. Galhotra said Ford couldn't have shared numbers earlier because it didn't know how many positions would need to be eliminated before going through each department, layer by layer.

"This is why it took time," he said. "For the top person to say, 'I'm going to give you a number to hit,' we've done that in the past. We could have hit the number. But we wouldn't have fundamentally redesigned how we're working."