America's Biggest Automakers Are Looking To Cut Costs Big Time

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Ford and GM are both looking to cut costs, but for different reasons.

Two of America's biggest automakers, Ford and General Motors, will be tightening their respective purse strings as they head into 2023 - but for different reasons, reports Automotive News (AN).

With a recession looming, now is not the time to ignore the financial books, especially if you're a car company. Despite posting solid sales figures throughout 2022, Ford posted disappointing financial results and announced that it had lost $2 billion last year. CEO Jim Farley expressed disappointment over the results and blamed it on the automaker's deep-seated issues.

"The strength of our products and revenue has masked this dysfunctionality for a long time," added the chief executive.

As a result, Ford hopes to trim more than $3 billion by the middle of the decade. CFO John Lawler said the company "is going to be very aggressive." This, says AN, could even include additional layoffs. In August of last year, the automaker axed thousands of workers.

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On the other side of the coin, General Motors led the field in terms of car sales in America. The financial results reflected this, with the company posting nearly $10 billion in net income. Despite being in a rosier financial position, GM will also trim the fat from its budget with various cost-cutting exercises. This includes reducing product complexity, for one.

The Detroit-headquartered firm also has plans to lower headcount by limiting hiring to essential roles. CFO Paul Jacobson said this does not mean GM will be enforcing layoffs. This economic outlook will put the company in good stead for the coming year, which is expected to wreak havoc on the financial world.

"We think the underlying business is going to be pretty consistent in '23 with what we saw last year, and I think that's a slightly more bullish statement than where most of the market is. We're going to continue to watch it," said Jacobson.

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Ford is preparing for a recession in the USA and Europe. "There [are] considerable headwinds in 2023 we didn't have in 2022," said CFO John Lawler. The automaker also needs to address quality concerns plaguing its vehicles. Last year, the automaker issued a staggering 65 recalls.

Both companies are also doubling down on their respective EV endeavors. GM recently announced it wants to sell 400,000 vehicles by the end of this year, which is a lofty goal. But the automaker is hoping cars like the new Cadillac Lyriq and the upcoming budget Equinox EV will change their fortune and hit Tesla where it hurts.

Rival Ford has admitted that the electric vehicles it currently sells are unprofitable. Executives have said the company will only turn a profit when new models come out around 2025. CEO Farley has said the Mustang Mach-E is too heavy, has too many parts, and is not aerodynamic enough. Eventually, Ford hopes its Model e EV business will make 8% profit margins.

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