Ford Truck Profits Hide Need for More Cuts, Morgan Stanley Says

Sean Proctor/Bloomberg News

Ford Motor Co. may need to cut more than the recently announced 7,000 salaried workers to compensate for slowing auto sales, a situation that’s not readily apparent because its F-Series pickup helped “cover industry blemishes” with $10 billion in pretax earnings last year, Morgan Stanley said.

To make up for an estimated 5% drop in global revenue as China ceases to be an engine of growth, Ford would need to cut an additional 23,000 salaried workers, auto analyst Adam Jonas wrote in note to investors May 21.

“It’s better that Ford execute restructuring at a time when its truck business is producing so much profitability and cash flow,” Jonas wrote. “We estimate the F-Series franchise alone would have placed Ford in the Top 40 on the 2018 Fortune 500 list.”

Jonas calculates that the F-Series generated about $42 billion in sales last year and $6.5 billion in net income, almost twice the $3.7 billion net profit Ford posted companywide for 2018.

Ford said that its salaried staff cuts, to be completed in August, will save the company $600 million a year. They are part of an $11 billion restructuring CEO Jim Hackett is leading to reverse a profit slide and prepare Ford for a future of electric and self-driving vehicles. Ford shares jumped above $10 last month after the company posted better-than-expected earnings that were supported by cost cuts and fat profits from the F-Series.