Auto manufacturer Ford surprised its employees earlier this year by announcing that it will be cutting expected stock award bonuses by 50% for its middle managers who operate above the company’s 76,000 other employees worldwide. Meaning, only 1,650 of those managers will receive their expected yearly bonus.
Why? Ford claims that the 50% cut has been instituted to focus on “driving a high-performance culture that recognizes and rewards employees for their business contributions,” as Fortune has reported.
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Ford CEO Jim Farley elaborated the move was made simply to close “our competitive gap over the next few years” with electric vehicle (EV) manufacturers such as Tesla, Chinese car makers and now the looming threat of tariff-based price hikes.
“We’re changing our culture to be more focused on quality and with accountable measures for all of our engineering teams and leadership,” Farley added.
However, there are some who believe this benefit-slashing strategy is about more than just incentives, and that Ford may be in more trouble that it appears — something that current and prospective stockholders should be mindful of.
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Ford Costs Are on the Rise, Stock is Falling
While Farley has characterized these cuts as being incentive-based to increase productivity, a source with inside knowledge about the situation told the Associated Press that the move as actually made to cut increasing costs.
Over the last year, Ford’s stock has decreased by approximately 23% in the face of stiff competition, with the expectation that President Donald Trump’s ongoing trade wars (and related tariffs) will only made the auto market more challenging in the near future. As a result, cost-cutting may be a major factor in Ford’s survival.
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Ford Might Be Trying To Cut Employees Indirectly
Fortune has speculated that, since benefits such as stock-based awards are implemented specifically to keep employees, a benefit-cutting move such as Ford’s was likely made as a “headcount-reduction tactic” designed to alienate some employees into quitting.
Again, this would be a move that would be made to further cut costs, albeit a rather extreme one — would could indicate Ford’s financial issues might be more serious than the auto manufacturer has let on.
What Does This Mean for Stockholders and Potential Stockholders?
For those who are already Ford stockholders, or considering buying Ford stock, the best bet at this point may be to simply hold. If you own Ford stock, hold and monitor the situation — while automaker’s stock has dropped over the last year, these cost-cutting measures may actually right the ship and help the company. Similarly, for those considering Ford stock but have yet to buy, now may be the time to monitor the company’s status before making the leap to being a stockholder.
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This article originally appeared on GOBankingRates.com: 2 Surprising Reasons Investors Should Look at Ford — Is It Time To Buy, Sell or Hold?
