Ford CEO Jim Hackett says the company is cutting the salaries of its top 300 executives as it looks to marshal its resources.
Caught in the economic storm unleashed by coronavirus pandemic, Ford Motor Co. is taking steps to save cash during the crisis even as it attempts to restart production.
Jim Hackett, Ford’s CEO, said in a letter to employees Thursday that the company would freeze executive pay and put off employee merit raises as part of the effort bolster Ford’s financial position. The letter follows a decision by Standard and Poor’s to reduce Ford’s credit rating to junk-bond status.
“We have taken significant actions to reduce costs and to fortify our balance sheet and cash position in this unprecedented situation. These include suspending the dividend paid to shareholders and accessing our credit lines for more than $15 billion in additional cash,” Hackett said in an e-mail to employees in which he noted Ford Executive Chairman William Clay Ford had given up his annual salary.
(Fiat Chrysler fires 2,000 contract workers on short notice as pandemic halts projects.)
Ford Executive Chairman Bill Ford Jr. is foregoing his annual salary during the pandemic.
“Sacrifice starts at the top. That is why the top 300 Ford senior executives will defer 20 to 50% of their salaries for at least five months starting May 1,” Hackett wrote. “Bill Ford has decided to defer his entire salary for this period.”
“Candidly, though, we need to do much more given the sharp drop-off in demand for new vehicles and the shutdown of our plants worldwide,” Hackett said.
“Work schedules and compensation may be temporarily reduced for people whose jobs can’t be done effectively away from Ford facilities. Others might be offered chances to take voluntary sabbaticals. In these and other cases, we will continue to provide health insurance and, for people who are exposed to the coronavirus, paid time off to cover a 14-day quarantine,” Hackett wrote.
(Ford planning to restart “key plants” as early as April 6.)
“The actions we’re taking now are wide-ranging and substantial. We hope they will be enough to give Ford the financial flexibility to ride out the economic and business effects of the coronavirus — so we can emerge as a stronger company,” Hackett said.
Ford is looking to make changes to save money during the outbreak, although it is planning restart some of its operations next month.
Hackett said the need for sharp cuts was required in the face of a sharp drop in demand for new vehicles.
“Our goal is to manage through the crisis without eliminating Ford jobs. Our people are dealing with enough challenges without being out of work, too,” Hackett wrote. “Plus, on the other side of the crisis, we will need our talented team to quickly ramp up to our full potential. Having said that, if the effects of the coronavirus on the global economy and Ford go on for longer — or are more severe — than we currently anticipate, we may have to take tougher actions. But not today,” he added.
(Detroit automakers, others temporarily shutter North American production.)
Fiat Chrysler, looking to bolster its finances as well, halted several projects, cutting loose 2,000 contractors. There is no timetable for when or if those contract employees will be reinstated. GM officials said they are not looking at job cuts.