Ford Motor will eliminate 3,000 salaried and contract positions, primarily in North America and India, as the auto maker restructures to catch up to Tesla in the development of software-powered electric vehicles.
During mid-day trading on Wall Street, Ford shares fell 4.8% as the market declined.
Jim Farley, the chief executive officer of Ford, has stated for months that he believes the carmaker in Dearborn, Michigan, has too many employees and that not enough of them possess the necessary skills as the auto industry transitions to electric vehicles and digital services.
"We are minimizing work, as well as reorganizing and streamlining business activities. Later this week, you will hear more specifics from the executives of your division," Bill Ford, chairman of Ford, and Farley wrote in an email.
Ford, like other major automakers, employs a workforce primarily to support a product selection based on classic combustion technology. Farley has devised a plan for Ford's future development of an extensive lineup of electric vehicles.
Ford, like Tesla, desires to increase revenue through services dependent on digital software and connection.
This year, Tesla's pre-tax profit margins have eclipsed Ford's, and Farley has been forthright about the need to reduce expenses.
In an email sent to employees on Monday, Farley and Ford stated that the company's cost structure is "uncompetitive compared to old and new competitors."
The rising cost of batteries, raw materials, and shipping is putting Ford and other automakers under further strain. Despite $3 billion in additional costs owing to inflation, Ford has maintained its full-year profit prediction.
Ford has started to divide its activities into electric, internal combustion engine, and commercial vehicle businesses.
Farley stated in July that there would be cost reductions in the combustion operations. Monday, Ford announced that the workforce reductions will effect all corporate divisions.
General Motors slashed 14,000 positions in late 2018 as it prepared to push its electric vehicle strategy.
The North American businesses of Ford, General Motors, and Stellantis will face a new workforce problem in 2023 as they begin contract discussions with the United Auto Workers union, which represents the U.S. plant employees of the Detroit automakers.
Leaders of the United Automobile Workers (UAW) have expressed worry that electric vehicles will result in fewer manufacturing jobs and an increase in positions at non-union battery and EV hardware firms.
Meanwhile, Tesla has also announced intentions to eliminate around 10% of its salaried staff.