For The Sake Of Efficiency And Performance Improvement, Ford Also Cuts Budget But Here's How

Ford Bronco. (Fok. Ford)

JAKARTA The budget cuts policy in various sectors carried out by the government has become a crowded controversy in the country. This policy has also just been implemented by Ford Motor Company by taking bold steps in an effort to improve performance by reducing operational costs.

The US auto giant has just announced a stock bonus cut for about 1,650 mid-level managers out of a total of 3,300 managers worldwide. This move will be a test for Ford's ability to improve performance and compete in the increasingly competitive automotive market.

This decision, disclosed by six internal sources to Reuters, quoted Wednesday, February 19, is part of CEO Jim Farley's strategy to restructure the company to be slimmer and more competitive.

It said the stock bonus, which is usually paid in March, will be given selectively this time. Senior managers have been instructed to select half of their mid-manager staff who will receive the bonus.

A Ford spokesperson explained that this change aims to encourage a high-performance culture that respects and rewards employees for their business contributions.

This move comes amid challenges Ford faces, including unsatisfactory financial performance compared to its rival General Motors (GM). Ford shares have decreased by about 23 percent over the past year, while GM shares have actually jumped about 23 percent thanks to lower costs and higher profits. Ford is also struggling with operational inefficiency, both in the electric vehicle (EV) division which is still losing money as well as conventional fuel vehicle businesses.

Morningstar analyst David Whiston sees this move as a signal that Farley is not satisfied with the status quo and wants to encourage change.

"With profit performance continuing under GM, Farley may not want to say that the status quo of providing a sustainable stock bonus for all managers is acceptable," Whiston said.

He added, "This could be a way to get some people to resign given their focus on middle managers."

However, cutting the stock bonus also raises concerns among employees. Some of them see it as a way for companies to reduce the number of employees and even look for job opportunities in other companies. In fact, Farley himself recently emphasized the importance of maintaining the best talent for the company's competitiveness.

"The most important thing for me is the best talent and culture," Farley told analysts this month, adding that the company cannot increase returns without recruiting and keeping the right people.

The stock bonus is part of a larger performance-based compensation system, which also includes cash bonuses. In addition to stock bonuses, Ford also sets company bonuses based on metrics such as vehicle quality, total revenue, and EV sales.