Analyst: Ford Salaried Job Cuts May Be Part Of New World In Auto Industry

The latest round of salaried employee job cuts at Ford Motor Company F are simply among the things car makers have to do with the global auto industry not growing, Morgan Stanley said Tuesday.

What Happened

Ford began notifying about 500 salaried employees they’d be among those let go in the latest round of white-collar layoffs at the company as part of a restructuring that in all is eliminating 7,000 salaried positions worldwide.

Ford’s layoffs are only hitting the salaried workforce and won’t affect hourly workers. Ford had about 200,000 global employees at the end of 2018. The company will renew its collective bargaining agreement with United Auto Workers employees this fall.

Ford said the cuts will save about $600 million a year.

What It Means

Ford is “being proactive to extract profit from cost savings as global production slows and vehicle mix probably doesn’t have much further to run,” Morgan Stanley analyst Adam Jonas said in a note.

The move is simply one of the things big car makers will have to contemplate in a new world in the industry, Jonas said.

“Auto companies globally are contemplating life where global production has greater downside risk than upside,” Jonas wrote. “Particularly as we see the impact of China (which accounted for 80 percent of the industry’s unit volume growth since 2007) not participating in the growth anymore.”

Jonas has an Equal-weight rating on Ford with a $10 price target.

What’s Next

Morgan Stanley is estimating a 5 percent drop this year in Ford’s global light vehicle volume, with another 4.4 percent drop by 2022.

“We view such savings as critical to offset the headwinds of a slower top line, rising compliance/technology costs and price pressure from capacity additions in many key segments (SUVs, pickups),” Jonas wrote.

Ford's stock traded around $10.22 per share Tuesday afternoon.

Related Links:

Ford To Cut 7K Salaried Jobs Worldwide As Part Of Restructuring

Morgan Stanley Warns Ford Layoffs Could Outpace GM Cuts

Ford CEO Jim Hackett, right, with Executive Chairman William Ford Jr. in Detroit. Photo by Dustin Blitchok.