Ford Layoffs Represent Latest Loss For Auto Industry After Record Sales
ARI SHAPIRO, HOST:
We just had two years of record car sales which capped the longest stretch of good times for the auto industry since the days of the Model T. Now the car business is stalling. This week, Ford said it would cut its white-collar workforce by 10 percent in North America and Asia. Just today, General Motors announced it would not sell cars in India anymore because it's not profitable. Even at powerhouse Toyota, earnings are falling. NPR's Sonari Glinton explains the U-turn.
SONARI GLINTON, BYLINE: Gary Bradshaw is portfolio manager at Hodges Capital Management in Dallas. Essentially he buys and sells stocks. Bradshaw often goes to luncheons and dinners where companies and CEOs sell themselves. About a month and a half ago, Bradshaw was at a luncheon, and Mark Fields, Ford's CEO, was at his table. This is what was going through Bradshaw's head during lunch.
GARY BRADSHAW: Here's a young guy that's running Ford, busting his tail, got Ford out of bankruptcy. Sales are the best they've been in years and years. And yet his stock's going down, and the board's getting itchy and questioning decisions. And now they're laying people off.
GLINTON: Bradshaw says he could feel Ford and Mark Fields' pain, but he says he and Wall Street have a fundamental question for Ford and the auto industry writ large.
BRADSHAW: What's the catalyst to get this stock moving right now or in the near term? And I can't see one.
GLINTON: It's not like the car companies are sitting around, rotating their tires. The companies are spending billions on research and development of autonomous cars, electric cars and investing billions in companies like Uber and Lyft.
KRISTIN DZICZEK: These are not bad times falling on the auto industry all of a sudden.
GLINTON: Kristin Dziczek is with the Center for Automotive Research. She's been in and around the industry her whole life. She says the business has almost never had it this good. Dziczek says, though, the auto business is fundamentally cyclical.
DZICZEK: We're one of the only industries that has a record year and is waiting for the other shoe to drop (laughter).
GLINTON: In many ways, the other shoe is dropping all over the automotive world. Toyota says profits will fall two years in a row. That's a first for the 21st century. Volkswagen is likely to have more layoffs. And Ford is slashing jobs despite the fact that it's the leading seller of trucks and SUVs when trucks and SUVs are booming.
DZICZEK: It's not a high-risk, high-reward kind of business. It's a high-risk, low-reward kind of business (laughter). You know, we've had really great years leading up to this year. And you know, if the investors have not been rewarded in the ways that they feel they need to be during those years, then maybe the auto industry isn't the place for them.
GLINTON: Dziczek says investors are looking for profits in the next quarter and the next few years. Stephanie Brinley, an analyst with IHS Markit, says forget the challenges of the future. It's hard enough for the car companies to do business today like switch from sedans to SUVs.
STEPHANIE BRINLEY: You've got plants that are built and currently producing sedans. You can't just kind of go in on a Saturday and say, all right, on Monday, we're going to produce utility vehicles out of this plant. That's going to take quite some time.
GLINTON: Brinley says the traditional car companies aren't just competing with each other but Apple, Google, Tesla, Uber and many others to come up with a revolutionary product - the self-driving car. This is while they're building and selling profitable cars right now. That's a lot of change.
BRINLEY: We sense that it's going to be a great change, but we don't know precisely when it's going to happen. We don't know precisely how it's going to happen. So everyone needs to be ready for it in a way that's consistent with their own corporate culture. Now how's that for a tough job?
GLINTON: Well, Ford's CEO, Mark Fields, does make $19 million a year, so there's that. Sonari Glinton, NPR News.
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