Ford Motor (NYSE:F) is reportedly gearing up for additional layoffs in the upcoming weeks to streamline its cost structure and focus on electric vehicles (EVs).
Separately, in a favorable development for Ford’s EV ambitions, on Thursday, the U.S. Energy Department said that it intends to grant a loan of up to $9.2 billion to the automaker’s joint venture with a Korean company for financing the construction of three new battery manufacturing plants.
Another Round of Layoffs at Ford
Ford is prepping up for yet another round of layoffs to be announced as early as next week, the Wall Street Journal reported on Thursday, citing people close to the matter. The layoffs would include mostly U.S. salaried workers impacting the gas-engine business, EV, and software divisions. However, the number of job cuts remains undisclosed.
The move comes on the heels of recent voluntary buyouts offered by peer companies General Motors (NYSE:GM) and Stellantis (NYSE:STLA) to ensure an efficient cost structure.
In August 2022, Ford eliminated 3,000 white-collar and contract employees. In early 2023, the company said that it was initiating a 3,800-employee reduction from its European workforce.
Factors Leading to Layoffs
Consumer demand and price hikes have supported automakers’ growth. However, expensive batteries, high raw material costs, and inflation have dented cost structures. This has impacted the bottom line.
Ford believes that aligning global staff and implementing cost efficiencies across its structure would place it in a better position to compete with rivals. It targets to achieve $3 billion in annual cost reductions by streamlining operations across the company.
In its recent Capital Markets Day event, Ford highlighted that its cost structure is around $7 billion to $8 billion higher than its competitors, the majority of which stems from Ford Blue. Thus, reducing costs and improving quality in this division could lead to higher margins and free cash flow for the company.
Automakers are also on the run to increase investments to expand their EV businesses, which are seen as the future of automobiles in a broader industry shift. Ford targets to produce 2 million EVs by 2026 end.
Is Ford a Good Stock to Buy?
Of the 12 Wall Street analysts covering Ford stock, seven have a Buy rating, four rate it a Hold, and one stands on a Sell rating. This takes the analysts’ consensus rating to a Moderate Buy. The average price target is $15.56, implying a 9.7% upside potential from current levels.
The past month has seen Ford receiving three rating upgrades. RBC Capital reaffirmed a Hold rating, while Jefferies and Citi upgraded the stock to Buy. Meanwhile, Daiwa upgraded the stock to a Hold from Sell. Jefferies analyst Philippe Houchois raised the price target to $16 from $13 and upgraded the stock to a Buy, as he was impressed with the company’s refreshed strategy to improve its returns.
The past three months have seen Ford’s stock price surge 25.8%, taking the year-to-date gains to 30.8%. Gains come amid the company reporting positive earnings, new investments, partnerships for strengthening its EV future, and positive full-year outlook.
