Amid job cuts, Ford workers get merit pay delayed by coronavirus

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Ford Motor Co. plans to delay the merit pays due to COVID-19 pandemic. - Dreamstime/Dreamstime/TNS

Ford Motor Co. plans to “be applying merit pay increases, delayed early in the pandemic, in October,” a company official confirmed to the Free Press.

T.R. Reid, Ford spokesman, declined to say how many workers would receive the increase or the size of merit pay.

“Merit pay increases vary by person, based on achievement of objectives. Many people get them, but, by definition, not all,” he said. “We won’t provide numbers.”

The message has remained consistent throughout the company’s global virtual town hall meetings in recent months as the automaker has worked to return to full production during the pandemic, Reid said.

“Since August, maybe July, people understood the plan was for October. That was confirmed in September,” he said. “We were pleased, but not surprised, given the resumption of global manufacturing and continued strength of our balance sheet.”

In addition, he confirmed the company also plans to reimburse 300 Ford senior executives who deferred 20% to 50% of their pay for at least five months starting May 1.

In addition to giving employees their deferred merit pay increases, Ford Motor Company is offering incentive packages to salaried employees to shed 1,400 jobs by Dec. 31, 2020.

Ford declined to specify dollars involved with the executive pay deferral.Executive pay deferral was linked to automotive debt repayment, which has been fulfilled, Reid confirmed.

He pointed to the company’s July 30 second quarter earnings report and said Monday, “We repaid $7.7 billion — one-half of the $15.4 billion revolver — earlier that week.”

‘Cost-reduction decisions’

Overall, the industry is showing signs of recovery from the devastating impact of COVID-19 on manufacturing. Few could predict what to expect just a few months ago.

On March 26, then-CEO Jim Hackett notified all employees in writing that the company would freeze executive pay and stall employee merit raises as part of a push to strengthen Ford’s financials and prevent job cuts amid the virus crisis.

“We have taken significant actions to reduce costs and to fortify our balance sheet and cash position in this unprecedented situation,” he wrote in an email. “These include suspending the dividend paid to shareholders and accessing our credit lines for more than $15 billion in additional cash. Candidly, though, we need to do much more given the sharp drop-off in demand for new vehicles and the shutdown of our plants worldwide.”

Hackett told workers to prepare for specific “cost-reduction decisions” that would affect everybody.

“Sacrifice starts at the top,” Hackett wrote when announcing senior executive salary deferral. “Bill Ford has decided to defer his entire salary for this period.”

Ford has declined to specify the amount of executive pay deferred. This all happened during an industry cash crunch. Ford and others shuttered plants for eight weeks between March and May in response to the pandemic.

1,400 cuts

In September, Ford said it wants to cut 1,400 jobs through voluntary retirement.

“Our hope is to reach fitness targets with the voluntary incentive program,” said a company memo to employees written by Kumar Galhotra, president, Americas & International Markets Group. “If that doesn’t happen, involuntary separations may be required.”

Cutting jobs while also giving merit pay may seem contradictory, but it’s a reflection of unpredictable economic demands, said Charles Elson, professor of corporate governance at the University of Delaware.

“Due to COVID, nothing is routine,” he said. “You owe the people that bonus; it was an obligation you were going to have to pay at some point. But then, obviously, you need cuts are needed going forward. It looks odd that you’re bonusing someone and forcing people out. But, again, we’re living in an odd time.”

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©2020 Detroit Free Press