Ford Is Slashing Costs Now To Avoid Carmageddon
Ford Motor Company was the last car company to set up shop in the US and survive for more than a decade (except for Tesla). Dozens of other car companies have failed in that time, unable to break into a brutal and entrenched market. But even Ford can see the clouds on the horizon, and it looks like the company is trying to scale back now to avoid massive shareholder losses in the future.
Problems At Ford
Ford just announced that it would be cutting back more than 5,000 jobs in Europe over the coming twelve months. The decision comes on the back of the need for the company to cut costs, automate more of its production, and reduce the number of different vehicles that it produces.
Ford is ubiquitous in Europe. The car company churns out millions of cars, vans and other vehicles for the general public who tend to prefer the American brand to their own products. The company says that the cuts to staff will help increase profitability by $11 million by eliminating low-value tasks and bureaucratic structures within the firm.
The Problem With ICE Vehicles
The company needs to adapt. The car business is changing, and Ford has done little to keep up with the transition to the electric drivetrain. It’s an enormous change that the company needs to take seriously if it wants to survive another century. So far, Ford’s strategy appears to be a focus on the core product, but what the firm doesn’t seem to understand is that even it’s bread and butter may become obsolete in the near future. It just won’t pay any more to produce ICE cars if the economics of battery technology work out as many analysts predict.
Of course, the secondary market for Fords is booming, as ever. Dealers like MotorConnect know that the Ford brand carries fabulous cachet with the general public and that people still want to own the company’s cars. What’s strange about the Ford situation is that the company still has a lot of brand capital: if it did something now, it could potentially avoid Carmageddon and emerge as one of the winners in the race to develop next-gen vehicles.
Will Ford Survive?
But the company doesn’t understand the power of exponentials. It’s used to seeing three to four per cent growth in the car industry every year and growing its own revenues by a similar amount. What it’s not good at is predicting fundamental shifts in the market, something that hasn’t happened since the days of the company’s namesake, Henry Ford, in the 1920s.
Ford isn’t the only established car maker experiencing problems. Honda also recently announced that it would be closing factories in Europe and the UK, with 3,500 job losses. And Jaguar looks as if it is again on the brink of disaster, posting yet more losses.
The auto industry is going through profound change, but nobody knows which way it will ultimately go. Will the traditional automakers survive? Or will we see new car companies emerge to take their place? It’s a brave new world.