Ford CEO Jim Farley has informed employees that manager bonuses will be cut to 65% of their usual amount, tying compensation more closely to quality and cost performance, according to sources familiar with the matter. Farley introduced a new performance-driven bonus system aimed at instilling greater accountability in the 121-year-old automaker’s culture, announcing the change in a town hall meeting on Wednesday.
The bonus restructuring follows Ford’s Q3 earnings presentation, where Farley acknowledged recent improvements but noted Ford’s progress remains insufficient. “I’m proud of the progress but we’re not satisfied at all,” Farley said Monday. Ford executives disclosed that the company will meet only the lower end of its annual guidance, leading to a more than 10% drop in Ford shares on Tuesday, with shares down an additional 1.3% to $10.34 on Thursday afternoon.
“When we meet or exceed our targets for those factors – and we achieve the ambitious goals of Ford+ – the team is rewarded,” a Ford spokesperson explained. “We are focused on lowering our costs, improving our quality, and making Ford a higher growth, higher margin, more capital-efficient and more resilient business.” Bonuses will remain contingent on Q4 performance and individual achievements, which Farley described as a “massive culture change.”
The shift mirrors similar moves from crosstown competitor General Motors (GM.N), which earlier this year restructured its compensation model to incentivize top performers with up to 150% bonuses, while the lowest 5% face “appropriate action,” potentially including termination. Ford’s updated model comes as U.S. automakers strive to maintain competitiveness with companies like Tesla (TSLA.O), known for stock-heavy pay packages.
