Many layoffs at U.S. companies over the past few months have so far been contained to the tech industry, a reversal of fortunes that has sparked a movement within the sector to cut back and become more efficient.
Mark Zuckerberg declared 2023 the “year of efficiency” for Meta during the company’s earnings call last week, signaling it would start scrapping more speculative projects and focus on streamlining operations. Amazon and Google parent Alphabet were also quick to declare a renewed focus on efficiency during their earnings calls.
But scaling back and streamlining operations is not a tech-exclusive goal, and one of the country’s largest and most historic automakers has been brutally candid about pivoting to a more efficient business model.
Executives at Ford Motor Company announced during its earnings call last week that it will be embarking on more ambitious cost-cutting measures in a bid to simplify operations, including additional headcount reductions after already laying off around 3,000 workers last August.
And now, Farley is putting his own engineers on notice in an interview with Jason Stein on his SiriusXM radio show “Cars & Culture with Jason Stein” set to air on Feb. 9.
“It takes us 25% more engineers to do the same work statements as our competitors,” Farley said in comments reported Monday by Bloomberg. “I can’t afford to be 25% less efficient.”
But reduced headcounts are likely only the first of many changes to come in the coming months, as Farley hinted at bigger efficiency pushes from manufacturing to delivery during his earnings call last week, adding that the changes will come fast as the company tries to make up lost profits.
“We have deeply entrenched issues in our industrial system that have proven tough to root out. Candidly, the strength of our products and revenue has masked this dysfunctionality for a long time. It’s not an excuse. But it’s our reality, and we’re dealing with it urgently,” he said.
Getting rid of ‘complexity’
Last Thursday, Ford reported earnings results that were nearly $1 billion below analyst expectations. Farley said the company left “about $2 billion of profit on the table” in 2022 during his call with investors, mainly due to supply chain issues and operational inefficiencies.
Ford CFO John Lawler later said the company is pursuing cost-cutting measures of over $3 billion a year in a call with reporters, adding that half of the $2 billion in lost profits came down to operational costs.
Farley said supply chain issues including a semiconductor shortage and difficulties delivering car parts played a large role in the company’s woes last year. And the only long-term solution to those issues, Farley said, is to refocus and simplify every layer of the company.
“[Layoffs] are things we could do in the short term, but I don’t want to just make the output the cuts without redesigning the work,” Farley said in an interview with CNBC published last Friday, adding that streamlining operations and removing potential complications is the bigger, and more difficult, issue to resolve.
Farley said cost-cutting measures will simplify and transform several aspects of Ford’s business, including supply chain management, product design, and manufacturing. One portion of the company that likely won’t see cutbacks, however, is in Ford’s new electric vehicle models, which Farley said he “can’t wait to show” to the public.
But while Ford expects to continue investing in electric cars, those areas will also be streamlined after growing pains in EV manufacturing hindered operations last year. Ford ran into problems producing its new Mustang Mach-E model, which Farley said during last week’s investor call that the company had inadvertently designed with 1.6km of unnecessary wiring in each car, which made vehicles 70 pounds heavier and added $300 to the cost of each battery.
“We have a lot of complexity relative to the customer and also inside our company. And we can cut the customer-facing complexity like we have, but it takes time to work that down to parts on the line, to the manufacturing line,” he told CNBC.
