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Sunday Strategist: Massive Layoffs May Be Only the Beginning of Ford’s Problems

Sunday Strategist: Massive Layoffs May Be Only the Beginning of Ford’s Problems

(Bloomberg Businessweek) -- Ford Motor is about to decimate middle management. On Monday, the company promised to pink slip 7,000 salaried workers—one in 10—by the end of the summer.

Two days later, it unveiled a robot for delivering packages, a partnership with Agility Robotics, a startup out of Oregon State University. The timing of the two announcements was instructive and likely carefully planned. 

For about two years now, Ford has insisted that it’s no longer just a manufacturer of cars and trucks, but rather a mobility company. Whatever the future holds, Ford assures, it will be there, and it will be machine-agnostic—cranking out Mustangs and man-sized box carriers as the market demands. 

“We must reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work, and cut costs,” Chief Executive Officer Jim Hackett wrote of the downsizing. When all is said and done this summer, the chain of command at Ford will go from up to 14 layers to no more than nine (10 if you count the robots).

It’s hard to overstate the existential crisis that car makers face. Electric motors and self-driving systems are upending about 120 years of investment and institutional knowledge. Even the idea of ownership—arguably Henry Ford’s greatest coup—looks tenuous. Whacking payroll seems like a logical step in a major retooling. 

Indeed, automakers have announced about 38,000 job cuts in the past six months, including at General Motors (14,000), Jaguar Land Rover (4,500), and Tesla (3,000).

But there’s plenty of evidence that layoffs do little to help  profitability. Those who survive a major firing event tend to become less productive and are far more likely to jump ship in the coming year. Customers tend to defect, too.

Most critically, layoffs can have a crippling effect on creativity and invention. Harvard’s Teresa Amabile did a seminal deep-dive at a Fortune 500 company downsizing in the late 1990s. “Either creative thinking was in fact lower,” Amabile wrote, “or employees were withholding the results of their efforts for possible use after leaving the company. Neither situation boded well for the organization's future.”

This, more than anything else, should keep Hackett awake this summer as he decides who to jettison. To make matters worse, Ford seems to be looking elsewhere for its biggest ideas, throwing money into Argo AI, a startup working on self-driving machines, and Rivian, which is trying to build an electric pickup. In culling its salaried workforce, Ford may just be stripping out the cogs of bureaucracy, but it’s a fraught exercise. The fallout could be a dearth of ideas. 

Meanwhile, Rivian, flush with Ford cash, has about 200 jobs to fill. Agility Robotics, four years after launch, is expanding rapidly as well. With humans.

Businessweek and Beyond

Sunday Strategist: Massive Layoffs May Be Only the Beginning of Ford’s Problems

To contact the editor responsible for this story: Bret Begun at bbegun@bloomberg.net

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