Ford Motor Company has made the decision to withhold stock bonuses for approximately half of its middle management team in a move aimed at reducing costs and boosting performance, according to multiple sources familiar with the matter. This year, around 1,650 out of 3,300 global middle managers will not receive stock awards, marking a significant shift in the company’s compensation strategy.
The stock bonuses, typically distributed each March, will be selectively allocated, with senior management instructed to determine which half of their teams will receive the awards. This decision is part of a broader effort led by CEO Jim Farley to streamline Ford’s operations and address inefficiencies, particularly within its electric vehicle (EV) division and its legacy fuel-powered vehicle business.
A spokesperson for Ford emphasized that the change was designed to foster a high-performance culture. “We are focused on driving a high-performance culture that recognizes and rewards employees for their business contributions,” the spokesperson stated.
Cost-Cutting Measures Amidst Competitive Pressure
Ford has faced ongoing challenges in optimizing its operations, especially as it works to compete in an increasingly competitive global automotive market. As the company contends with both U.S. rivals like General Motors (GM) and the rapid growth of electric vehicle makers such as Tesla, Farley has consistently conveyed that Ford is undergoing a significant transformation to become leaner and more competitive. This includes reducing unnecessary costs across its divisions.
Over the past year, Ford’s stock has fallen approximately 23%, while General Motors has seen its shares rise by 23%, driven by lower costs and stronger profits. Amidst these struggles, Farley has highlighted the challenges posed by unpredictable trade policies, particularly with regards to U.S. tariffs. While Ford’s competitors are more vulnerable to tariffs on imports from Mexico and Canada, Ford itself could face a 25% tariff on vehicles like the Mustang Mach-E and Bronco Sport, which are produced in Mexico.
Aiming for Talent and Culture Over Bonus Payouts
The decision to cut bonuses has sparked mixed reactions among employees. Some viewed the change as an indication that Ford may be attempting to trim its workforce, and reports indicate that certain employees are already considering job opportunities with other companies. Analysts, including David Whiston of Morningstar, suggested that the bonus cuts might be a strategic move to push out underperforming managers or encourage voluntary departures. “With continued profit underperformance versus GM, Farley probably does not want to say the status quo of continued stock awards for all managers is acceptable,” Whiston said. “This could be a way to get some people to quit given the focus on middle managers.”
Historically, stock grants have served as a retention tool at Ford, with the awards vesting over a three-year period. Farley has previously emphasized the importance of retaining the best talent to ensure the company’s long-term competitiveness. “The most important for me is the best talent and the best culture,” Farley said during a recent earnings call. “We cannot improve our results unless we recruit and retain the right people.”
Broader Changes to Compensation Structure
The stock bonuses are part of a wider performance-based compensation system at Ford, which also includes cash awards for salaried employees, most of whom are managers. In addition to stock grants, Ford uses a companywide bonus structure that is linked to key performance metrics such as vehicle quality, overall earnings, and EV sales. For 2024, approximately 69% of the total potential bonus will be tied to these metrics.
Despite these efforts, Ford’s lackluster performance in certain areas, particularly in its EV segment, has led to further cuts in bonuses. Reuters previously reported that these bonuses would be reduced due to the company’s underperformance, signaling that the automaker is taking more drastic measures to address its financial and operational challenges.
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