It seems everyone is watching Tesla’s share price these days. This week, its stock tumbled below $200 a share for the first time in recent memory. But other companies are also facing severe financial headwinds as the auto industry struggles to keep pace with the changes that stricter emissions standards, the transition to electric cars, and the push for self-driving vehicles are bringing. In fact, while Tesla is seeing strong growth year over year, many other automakers are seeing their sales dive.
Ford Will Cut 7,000 Jobs
Ford CEO Jim Hackett sent an email to all Ford employees on May 20 informing them the company plans to eliminate 7,000 salaried positions by the end of August. The fact that the move is being marketed as a Smart Redesign will do little to ease the financial pain for those who find themselves out of a job in a few months’ time.
“The business imperatives behind Smart Redesign were compelling. To succeed in our competitive industry, and position Ford to win in a fast-changing future, we must reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work, and cut costs,” the email says. Hackett stressed the need to speed up decision making and empower the managers who remain. About 20% of its managers will be let go as part of the Smart Redesign program.
Putting a brave face on it does not change the fact that Ford, like many of its competitors, has become bloated with middle and senior-level supervisory personnel who add little to the company’s bottom line. The moves are expected to save the company about $600,000,000 a year. A quick back of the envelope calculation puts that at $85,285 per employee.
The cuts will take place first in North America and ripple through the rest of the company’s worldwide operations over the next several months.
Jaguar Land Rover Suffers Huge Loss
Things at Jaguar Land Rover are bad and getting worse. Despite the introduction of its all electric I-PACE SUV, the company, which is wholly owned by Tata Motors of India, reported a staggering $3.6 billion loss during the last fiscal year. Half of that red ink is due to accounting legerdemain.
The Guardian reports “Half the £3.1 bn non-cash charge was taken after JLR accepted that previous investments in property and machinery were worth far less than previously thought. The other half was attributable to goodwill impairments, an accounting correction that recognizes future earnings potential is likely to be diminished.”
JLR is being whipsawed by a confluence of adverse market forces. Sales in China have slipped as competition from other SUV luxury models has increased. In UK and Europe, JLR has relied heavily on diesel engines to improve the fuel economy of its largest Land Rover models. Absent diesels, those vehicles often achieve less than 10 mpg in real-world driving — shockingly low even for typically well-heeled Land Rover owners.
Ralf Speth, CEO of JLR, said in a statement, “Jaguar Land Rover has been one of the first companies in its sector to address the multiple headwinds simultaneously sweeping the automotive industry. We are taking concerted action to reduce complexity and to transform our business through cost and cash flow improvements.”
Karel Williams, an automotive analyst and professor at Manchester Business School, tells The Guardian the company may need to scale back its production targets. “It’s hard to see how this can be resolved without some rationalization of the product range and without … abandoning any aims to go for volume. The Chinese market is clearly a problem and in all their other markets they face increasing competition in the SUV segment. There is a business here but the size of the business, that remains to be seen.
“They’ve been embarrassed by the shift against diesel. That was misfortune. Whether they [can] survive in the transition to battery electric is an interesting question. The Chinese will try seriously to move into electric cars and the Germans will not easily cede their position as the conquerors of the last 30 years.”
The company has said it plans to eliminate 4,500 workers from its payroll this year and that its efficiency plans have already delivered £1.25 billion in savings. The Guardian notes that the company has declined to address rumors that it is interested in a possible takeover bid from PSA Group.
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