Ford Motor CEO Jim Hackett warned employees Thursday that "tougher actions" such as job cuts could be needed depending on the severity and length of the coronavirus pandemic and its impact on operations.
In a letter to employees, Hackett said the automaker's goal is "to manage through the crisis without eliminating Ford jobs," but noted that there are circumstances that could force the company's hand. He said if the "effects of the coronavirus on the global economy and Ford go on for longer -- or are more severe -- than we currently anticipate, we may have to take tougher actions. But not today."
"Our people are dealing with enough challenges without being out of work, too," he said. "Plus, on the other side of the crisis, we will need our talented team to quickly ramp up to our full potential."
Hackett also said Ford will defer merit-based salary increases, partially defer executive salaries, suspend overtime for salaried workers and freeze hiring for noncritical skill positions. He said work schedules and compensation may be "temporarily reduced" for workers whose jobs can't be done from home and that others may be offered voluntary sabbaticals.
Hackett said the company would continue to provide health insurance and paid time off for any impacted workers, including covering a 14-day quarantine if workers are exposed to the virus.
The message comes a day after Moody's Investors Service downgraded Ford's credit rating to junk status and shortly after the company announced plans to restart its North American manufacturing operations beginning in early April. The plants shuttered last week amid pressure from the United Auto Workers union to reduce the spread of COVID-19.
Ford shares were trading up nearly 2% to $5.46 as of mid-morning Thursday. The stock is down 41% so far this year and 37.4% over the past 12 months.
Hackett, in the letter, said Ford's top 300 executives will defer 20% to 50% of their salaries for at least five months as it attempts to manage through the COVID-19 pandemic. The deferments will begin May 1, he said.
The accumulated deferred salary amounts will be paid after the automaker has repaid at least $7 billion of its automotive debt, the company said in a public filing. It tapped $15.4 billion in credit lines and suspended its highly-coveted dividend last week.
In addition to the executive salaries, Ford Executive Chairman Bill Ford Jr., great-grandson of company founder Henry Ford, will defer 100% of his cash salary. He earned a $1.7 million base salary in 2018, according to the company's latest proxy filing.
Hackett, whose base salary was $1.8 million in 2018, will defer 50% of his salary, according to the company. Ford Chief Operating Officer Jim Farley and Ford Chief Financial Officer Tim Stone also will defer 50% of their salaries, the company said.
"The actions we're taking now are wide-ranging and substantial," he said. "We hope they will be enough to give Ford the financial flexibility to ride out the economic and business effects of the coronavirus – so we can emerge as a stronger company."