Ford Motor Co. has announced it is offering severance packages to some white-collar employees it deems as underperforming, according to a report from the Wall Street Journal.
In an email sent to all U.S. managers, the new initiative will focus on employees employed for at least eight years with Ford, whom the company has identified as demonstrating a pattern of declining performance.
Low-performing employees with fewer than eight years served may choose to skip the review and accept an involuntary separation with severance, a Ford spokeswoman said.
Employees who fit the criteria will now have an option of taking a severance instead of enrolling in a performance-enhancement plan that can take four to six weeks. The catch is employees who choose the enhancement plan but do not demonstrate any improvement will be ineligible for any severance, according to the email.
Ford said the changes would streamline how managers confront poor performance and provide an alternative to the improvement plan. It is part of the effort to cut spending by $3 billion annually by 2026 as Ford transitions to electric vehicles.
Earlier in the year, Ford reorganized, creating new divisions, including a segment focused solely on EVs. The new policy went into effect on October 1.
Ford CEO Jim Farley said the shift to electric vehicles prompts a reassessment of company resources.
“We absolutely have too many people in certain places, no doubt about it,” Farley said on the company’s second-quarter earnings call in July. “We have skills that don’t work anymore, and we have jobs that need to change.”
When Ford announced its third-quarter earnings report on October 26, it missed earnings estimates by $0.46 even though it beat sales estimates by $88.13 million. Ford currently has 30,000 salaried employees in the U.S.
The decision to cut its white-collar workforce fits the broader trend in which underperforming automakers are cutting costs to focus on new technologies and low-emission vehicles.
