confirmed Monday it is laying off roughly 3,000 white-collar and contract employees, marking the latest in its efforts to slash costs as it makes a longer-range transition to electric vehicles.
Ford sent an internal email Monday to employees, saying it would begin notifying affected salaried and agency workers this week of the cuts. The email was viewed by The Wall Street Journal.
The 1% reduction in Ford’s workforce of about 183,000 mostly targets employees in the U.S., Canada and India. About 2,000 of the targeted cuts will be salaried jobs at the Dearborn, Mich., auto maker. The remaining 1,000 employees are working in contract positions with outside agencies, the company said.
The cuts weren’t unexpected. The Wall Street Journal and other media outlets reported in July that layoffs were coming for white-collar staff as part of a broader restructuring to sharpen the car company’s focus on electric vehicles and the batteries that power them.
Ford shares closed down 3.9% each on Monday, after news of a $1.7 billion jury verdict in a case involving a rollover accident with one of the company’s F-250 pickup trucks that left two people dead.
The company’s email, signed by Executive Chair
Bill Ford
and Chief Executive
Jim Farley,
said Ford is changing the way it operates and redeploying resources as it embraces new technologies that weren’t previously core to its operations, such as developing advanced software for its vehicles. The job cuts are effective Sept. 1, a spokesman said.
“Building this future requires changing and reshaping virtually all aspects of the way we have operated for more than a century,” the internal message said.
Mr. Farley has said recently that Ford has too many employees, and that the existing workforce doesn’t have the expertise needed to transition to a portfolio of electric, software-laden vehicles.
He has said he aims to cut $3 billion in annual costs by 2026 as part of his goal to reach a 10% pretax profit margin by then, up from 7.3% last year.
Like many global auto makers, Ford is pouring money into electric vehicles in an effort to close the sales gap with
Tesla Inc.
The company has said it would spend about $50 billion through 2026 to develop EVs, targeting global sales of two million by then.
Mr. Farley earlier this year divided the company into separate divisions, including one to focus on electric vehicles and advanced technologies, and another to handle its traditional internal-combustion-vehicle lines.
He has said profits from its lineup of gasoline and diesel-engine vehicles will help fund the transition, but that part of the business must operate more efficiently.
Supply-chain issues and a shift toward electric vehicles have accelerated changes in the car-buying process. We visit a car dealer to see how consumers and sellers are adapting and what changes might be here to stay. Photo: Adam Falk/The Wall Street Journal
U.S. electricity customers are facing some of the largest bills in years because of volatile natural-gas prices, which are being driven higher by winter demand and a global supply shortage being made worse by Russia’s war against Ukraine.
Already, the natural-gas supply crunch has made it substantially more expensive for utilities to purchase or produce electricity. As a result, some customers have seen winter power bills increase by 20% or more compared with the year before, in addition to seeing higher home-heating bills.
Now, with sanctions against Russia threatening to further constrain global natural-gas supplies, higher prices are likely to persist, executives and analysts say, especially in regions heavily reliant on the fuel for power generation.
Domestic natural-gas prices reached the highest levels in years ahead of winter as exporters shipped record amounts of it overseas, and prices have lately risen again on fears of another global shortage.
“It will have an impact on customers’ bills,” said
Nick Akins,
chief executive of
American Electric Power Co.
AEP -0.58%
, a utility company that serves more than five million customers in 11 states.
U.S. Henry Hub gas prices on Friday reached about $4.73 per million British thermal units. That is up from about $2.66 per million British thermal units a year ago.
Utilities across the country recover gas and electricity supply costs by charging them to customers, driving prices sharply higher this winter after a year of steady increases. Average retail electricity prices for residential customers rose 4.3% last year to 13.72 cents per kilowatt-hour, the largest annual increase since 2008, according to the Energy Information Administration. The increase, which generally matched inflation overall, was spurred in part by the cost of natural gas delivered to power plants, which more than doubled from 2020.
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Utilities must receive regulatory approval to raise rates, but it is generally standard practice for regulators to allow for them to recoup higher fuel and supply costs through customers.
The recent surge in electricity prices has been especially acute in New York.
Consolidated Edison Inc.,
ED 0.20%
which provides electricity to about 3.3 million customers in the New York City region, said city residents using about 300 kilowatt-hours a month saw their January bills increase by roughly 23%. Most of that increase resulted from higher supply costs.
ConEd said it is working to hedge against price volatility and adjusting its billing processes to benefit customers.
Hector Ruiz, 44 years old, a fiber-optic engineer who has lived in his house in Clifton Springs in upstate New York for the past eight years, said he had never paid more than about $500 a month for gas and electricity. His bill last month was just shy of $1,000, he said, scrambling the budget for his family of four and prompting him to tap into funds set aside for other purposes.
Hector Ruiz said his latest bill for gas and electricity was just under $1,000, which is double what he was paying.
Photo:
Malik Rainey for The Wall Street Journal
“My utility bill literally doubled overnight,” Mr. Ruiz said. “Has it been a punch to the gut? Yes.”
Gabriel Thompson, 40, a photographer who lives with his wife in Westchester County just north of New York City, saw his electricity bill rise sharply alongside his gas bill in January. His cost of electricity supply reached 18 cents a kilowatt-hour that month, up from about 6 cents a kilowatt-hour the prior month. Including delivery charges, he paid more than $200 for electricity and about $585 for natural gas.
“It makes me glad I don’t have an electric car, which I’d love to have,” Mr. Thompson said. “People don’t have infinitely expendable income.”
The increases come amid broader concerns about high inflation. The consumer-price index surged 7.9% in February, the highest rate in 40 years.
Gabriel Thompson says higher utility costs make him glad he doesn’t have an electric car.
Photo:
Clark Hodgin for The Wall Street Journal
Eversource Energy,
ES -0.53%
a utility that serves 3.6 million electric and natural-gas customers in Connecticut, Massachusetts and New Hampshire, raised electricity rates at the start of January to account for higher wholesale prices. The company said an average residential customer could see bills increase by as much as 25% through the end of June.
James Daly,
Eversource’s vice president of energy supply, said regional pipeline constraints exacerbated a gas-supply shortage resulting from higher seasonal demand and relatively flat domestic production. The company also saw a surge in prices for liquefied natural gas as exporters shipped more of it abroad, though it doesn’t rely heavily on that type of fuel.
“We can see prices run up faster than in other parts of the country if there’s a supply-demand imbalance,” Mr. Daly said.
Commodity prices are hot right now. But the prices investors are paying in the open market for commodities like coffee, copper or corn can have little to do with the price customers pay at the store. WSJ’s Dion Rabouin explains. Illustration: Adele Morgan
In California, wholesale power prices have risen as the state’s largest utilities plan to invest billions of dollars to reduce the risk of their power lines igniting wildfires. San Diego Gas & Electric, a unit of
Sempra
that serves about 1.5 million electric customers and 900,000 natural-gas customers, raised rates at the start of the year to account for higher supply costs. Average residential bills increased by 11.4%.
Guggenheim analyst Shahriar Pourreza said utilities have long counted on low gas prices to keep supply costs down, giving them greater leeway to invest in their systems without major rate increases. Now, with gas prices likely to remain elevated, companies will face more pressure from regulators to keep spending in check and consumers’ bills lower, Mr. Pourreza said.
“You haven’t seen the same level of inflation in utility bills like you’ve seen in other industries and other products,” he said. “It’s been a subsidy for them, and that subsidy is likely going away.”
The recent surge in electricity prices has been especially acute in New York. A street in Mount Vernon.
Photo:
Clark Hodgin for The Wall Street Journal
Write to Katherine Blunt at Katherine.Blunt@wsj.com
Chase Smith had been saving for her first car long before she had a license to drive. But when the 16-year-old was ready to buy, she saw the prices and hit the brakes.
“It was definitely very frustrating, especially because all my friends have cars,” said Ms. Smith, who was eager to end her one-hour bus trips to school in upstate New York and stop catching rides from her parents. “But in the end, I just know it’s a smart decision,” she said.
Buying a used car, or receiving one from parents, has long been a rite of passage for generations of young drivers in the U.S. Skyrocketing prices and a shortage of preowned inventory are adding new strains to a teen’s initiation into the driving world, prompting some shoppers to delay purchases and others to stretch their budgets.
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Used-car prices were rising before the pandemic hit, but in the past two years, they have consistently hit more records as supply-chain disruptions have slammed the auto industry, leading to a shortage of cars new and used.
The average listing price for a preowned model hit $28,500 in January, a 31% jump over the same prior-year month, according to Cox Automotive. Comparatively, new-vehicle prices rose 12% during that same time frame, the firm’s data shows.
The surge has walloped price-sensitive buyers, especially younger ones, who have reliably turned to the used-vehicle market for more-affordable options, analysts say.
The number of 16-to-25-year-olds purchasing a used vehicle dropped 35% between 2019 and the end of 2021, more than for any other age group, according to data provided by research firm J.D. Power.
Purchases of new cars also have slipped for this age group over the past couple of years, the firm’s data shows.
While Gen Zers had been showing more interest in automobiles before the health crisis, they are now being held back by the rising prices and paltry selection of low-cost vehicles, analysts and industry executives say.
“As an industry, I think there should be some concern,” said Jack Hollis, senior vice president of auto operations at Toyota Motor North America.
Capturing younger buyers, who will be the driving force behind the economy in the next 20 to 40 years, is critical for the car business because it ensures brand loyalty and a future customer base, Mr. Hollis added.
An employee shows a used vehicle to potential buyers in Jersey City, N.J., early in the pandemic.
Photo:
Angus Mordant/Bloomberg News
At current price tags, the average monthly payment on a financed used car was about $540 last month—up 33% from $407 in January 2020 and close to what some consumers would have paid on a new vehicle two years ago, according to Edmunds.
Meanwhile, earnings for teenagers haven’t kept pace. In roughly the same period, the median wage of workers ages 16 to 19 increased 14.6% to about $2,453 a month at the end of last year, according to the Bureau of Labor Statistics.
Even parents, who in many cases assist with the purchase or buy the car outright for their teens, are balking at the higher prices.
Bradley Rose, a father living in Florida, said he was run ragged driving the kids around to events and clubs. He was eager to get a car for his 16-year-old daughter to lighten the load.
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Have you bought or sold a used car this year? Join the conversation below.
He found dealership lots near empty and had trouble finding a vehicle around his $10,000 price limit. A pilot, Mr. Rose said he considered flying cross-country to find a low-cost vehicle, before finding a used 2016 Toyota Corolla LE that had 50,000 miles on it. He said he paid about $19,000 for the car.
“It’s way overpriced, but we wanted her to be happy; we wanted her to be safe,” Mr. Rose said.
For decades, car companies tried to appeal to this demographic by selling cheap, entry-level models, such as compact sedans and hatchbacks. Some, such as
Toyota Motor Corp.
, had youth-oriented brands that offered small cars priced at under $20,000.
In recent years, many brands have dropped their budget models from showrooms, as car manufacturers shifted to selling more higher-priced trucks and SUVs. That trend has left budget-minded buyers, including teens and young adults, turning to used-car offerings, analysts and auto executives say.
Now they are finding the pickings are slim even there.
The availability of used vehicles has grown scarce over the past two years, in part because the typical channels for restocking lots have also faced challenges. Rental-car firms are holding on to their vehicles longer because they can’t secure new ones, and fewer leased cars and trucks have returned to dealerships for resale in the used market.
While preowned inventory levels are starting to bounce back, the supply on dealer lots in December was still down nearly 20% from the same time in 2019, according to Cox Automotive. For those looking for a used car under $10,000, there were only about 8,500 available in the entire U.S. in January, a 34% decrease from April 2021, the firm’s data shows.
The challenges are resulting in disappointment for parents and teens.
Marc Levine, a father of two living in Florida, was hoping to help his 16-year-old son buy his first set of wheels, as he did with his older child. When he saw the elevated prices, he decided to hold off, telling his son that it was risky to buy at the top of the market.
Lettuce Entertain You Enterprises Inc., a Chicago-based restaurant group, has added a 3% “processing fee” to checks at many of its restaurants.
Harley-Davidson Inc.
added a charge last year to its motorcycles to cover rising material costs.
Peloton Interactive Inc.
in January began charging $250 for delivery and setup of some of its indoor bikes, a service that was previously included free.
Companies are finding all kinds of ways to make consumers pay for rising costs. Often that is not reflected in the posted price.
The Labor Department’s consumer-price index, which measures how much consumers pay for goods and services, rose to 7.5% in January compared with the same month a year earlier—the biggest rise since February 1982.
The index accounts for some changes that raise consumers’ costs, such as smaller package sizes and some fees attached to hotel packages or car purchases. But it can miss other ways in which dollars don’t stretch as far– a hotel that changes sheets only between guests, a theme park that cancels its free airport shuttle, or an auto dealer that requires customers to buy a protective paint coating with a car.
With supply-chain challenges, pent-up demand and a tight labor market leading to inflation, businesses are looking for subtle ways to pass along rising costs. Particularly in the food business, companies have long used what the industry calls weight-outs, or shrinking package contents instead of raising prices, during economic distress periods such as the 2007-2009 recession.
“There is a lot more to come,” said
Doug Baker,
head of industry relations for FMI, a food-industry trade organization. “Everything is on the table in an effort to deal with those cost increases, and at the same time, not make it too difficult for consumers to shop.”
A global computer-chip shortage has reduced vehicle inventories just as Americans were buying cars in record numbers, pushing up prices for new vehicles. In many cases, they are selling for thousands of dollars above manufacturers’ suggested retail prices, said Tom McParland, founder of Automatch Consulting, which helps consumers find vehicles.
“They’re calling it a market adjustment fee,” said Mr. McParland. “That’s the new thing they are doing: hiding markups with substantially overpriced accessories like mud flaps and cargo protectors.”
Ford Motor Co.
and
General Motors Co.
have said they are cracking down on dealerships using that tactic.
Harley fees
Base prices on Harley-Davidson’s motorcycles haven’t gone up much in recent years, the Milwaukee company said. But to cover rising costs, it added a mandatory materials surcharge last year, which dealers are passing on to customers. Dealers said the fee, which varies based on the model, is easier for the company to adjust than base motorcycle prices when costs decrease.
Dealers said the fee is $850 to $1,500 a bike. Harley this week told analysts that the surcharges helped boost revenue during the fourth quarter last year.
Harley-Davidson added a fee to its motorcycles to cover rising material costs; a dealership in Louisville, Ky., this week.
Photo:
Luke Sharrett/Bloomberg News
Some restaurants are adding new fees in response to escalating costs for food and packaging, and for wage increases executives say are needed to keep cooks and servers.
Brinker International Inc.’s
Maggiano’s Little Italy in October 2020 started charging $5 for a second, to-go pasta dish offered as part of a two-entree deal. For about a decade before the pandemic, the chain had offered a second classic pasta dish free.
“We’ve had no push back,” Maggiano’s president Steve Provost told investors last October. A Brinker spokeswoman said the price change allowed the company to invest more in the value of its carry-out offerings.
When Michael Pfeifer, a marketing professional, picked up the check for his meal at
RPM
Seafood in Chicago this week, he was surprised to find a 3% Covid surcharge added to the bill. “What’s next?” he said. “A dishware rental fee?”
The fee, added in the spring of 2020, offsets the cost of pandemic-related government regulations and mandates, said RJ Melman, president of Lettuce Entertain You, which owns RPM. “These fees can be removed and refunded for any guest that requests,” he said, “no questions asked.”
Peloton, according to its website, is adding the new $250 fees on bikes and a $350 delivery-and-setup fee for some of its treadmills. It cut the price of its original stationary bike in August to $1,495 from $1,895. With the added fees, the total price is now back up to about $1,745, as the company dealt with slowing demand and its own rising costs.
Peloton declined to comment on the fees. In an earnings call on Tuesday, Peloton CFO
Jill Woodworth
said that the fees could cut into consumer demand but that they were part of a “critical learning” process as the company restructures and cuts costs for the post-pandemic era.
Walt Disney Co.
’s Disney World in Orlando stopped offering free airport shuttles—known as the Magical Express—this year, leaving Disney guests to pay for their own transportation. The parks added several fees last year while keeping the base ticket price at $109. A fast-pass system that let park guests make reservations for rides, which used to be free, was discontinued and replaced by a new system that costs $15. And some popular rides, like Star Wars: Rise of the Resistance and Space Mountain, now cost between $7 and $15, on top of the park admission ticket.
Disney offers “a wide range of options to match different budgets and interests,” said Disney spokesman Avery Maehrer.
At its theme-park restaurants, Disney is trying to avoid across-the-board price increases, Disney CFO
Christine McCarthy
told analysts in November. “We can substitute products. We can cut portion size, which is probably good for some people’s waistlines,” she said. “But we aren’t going to go just straight across and increase prices.”
Consumer backlash
Consumer pressure has led some companies to back off added fees, including
Frontier Group Holdings Inc.
The airline, which uses a la carte pricing that lets frugal travelers choose to forgo amenities, in May 2021 added a $1.59-per-flight-segment Covid-related fee. After consumer backlash, Frontier in June stopped breaking it out as a component of its base fare but it didn’t stop charging it. Frontier didn’t respond to requests for comment.
In a press release it said: “The charge, which was included in the airline’s total promoted fare versus an add-on fee, was meant to provide transparency and delineate what portion of the fare was going toward COVID-related business recovery.”
Some of
Marriott International Inc.’s
Autograph Collection hotels had been charging a “sustainability fee” of about $5 a night. The company that manages the properties, Innkeeper Hospitality Services LLC, says it covered things like more-efficient HVAC systems.
They stopped charging the fee several weeks ago, “because we understand that while we believe in environmentally responsible stewardship, not everyone cares about our planet’s health,” IHS CEO Amrit Gill said. He said Marriott had asked the company to stop charging the fee. Marriott declined to comment.
The Biden administration has begun to look into some forms of hidden fees, which it calls “junk fees.” The administration says the amount being charged is not always tied to the costs faced by the company providing the goods or services. The Consumer Financial Protection Bureau is seeking public input on financial services, such as bank overdraft fees, while the Transportation Department is planning actions on airline baggage fees.
John Fiorello, a father of four in Torrington, Conn., was dismayed to see prices rising in his local grocery-store aisles but was initially pleased to see that the blocks of cheese he usually buys hadn’t gone up much in price—perhaps 10 cents, he said. Then he noticed that the package had shrunk, to 12 ounces from 16.
“I picked up the block and said, ‘this is definitely smaller,’ ” Mr. Fiorello said. “It just adds an extra layer of stress.”
Shrinkflation, as economists call it, tends to be easier for companies to pass on to consumers. Despite labels that show price by weight, research shows that most customers look at only the overall price.
The food industry has long shrunk package contents instead of raising prices during economic-distress periods; a Salt Lake City grocery store in October.
Photo:
George Frey/Bloomberg News
“There are sizes that people remember, like a half gallon of ice cream,” said John Gourville, a Harvard Business School professor. “Once you break from iconic sizes, it’s pretty easy to move from 13 ounces to 12 ounces.”
Over the years, tuna cans have come to contain less tuna and toilet-paper rolls less tissue, said
Burt Flickinger III,
managing director of Strategic Resource Group, a consulting firm that works with consumer-product companies. “Historically,” he said, “it’s called a ‘cheater pack.’ ”
Companies have become more sophisticated and use multiple tactics to protect their profitability, he said. They can pull back on discounts, stop making low-selling products and create new varieties that sell for higher prices
Downsized Oreos
Oreo-maker Mondelez International Inc. raised prices by an average of 6% to 7% in the U.S. last month, but it wasn’t enough to make up for its higher costs, the company said. So Mondelez has been introducing new sizes and flavors it says are more profitable.
Oreo’s new 110th Birthday chocolate confetti-cake cookies cost about 10 cents more than regular Double Stuf Oreos at several grocery stores, even though the new flavor comes in a slightly smaller package. At a
Target Corp.
store in Chicago, the limited-edition birthday Oreos, which came out January, cost $3.79 for a 24-cookie package and the Double Stuf ones cost $3.69 for a 30-cookie package.
Retailers set the final prices. Mondelez said it charges the same for the two products, and its limited edition flavors are typically different-sized packages than regular ones. A Target spokesperson said: “We’re priced competitively throughout the markets we do business.”
Economists and analysts at the Labor Department’s Bureau of Labor Statistics monitor prices of thousands of goods and services. They can account for shrinkflation, because they track the cost of certain products by weight and quantity—so a cereal box that costs the same amount but now has 30% less volume would be registered as a price increase.
They said their efforts can’t identify every fee or dropped amenity, such as a hotel room rate that remains the same but that no longer includes fresh towels or a hot breakfast. “We do not capture the decrease in service quality associated with cleaning a room every two days rather than one,” said Jonathan Church, a BLS economist.
Disney World in Florida added several fees last year while keeping the base ticket price at $109; the Magic Kingdom last summer.
Photo:
Joe Burbank/Orlando Sentinel/Associated Press
Jeremiah Mayfield and Carlos Larrea stayed at Alohilani Resort in Honolulu in December and opted for a $75 a-night upgrade to “club level” for free food and drinks. But they said they could rarely use it because the resort didn’t have enough staff to replenish the club-level amenities. After complaining, they were offered free dinner.
Alohilani General Manager Matthew Grauso said that quality and efficient guest service are top priorities and that he tries to remedy any shortfalls immediately, adding, “The pandemic has presented a unique set of challenges within the hospitality industry.”
“We gave them hell for it,” Mr. Mayfield said. “We paid $800 a night. We never expected it would be so scarce in terms of service and amenities.”
Many hotel chains are replacing complimentary hot breakfast buffets with a snack bag. Some fitness centers and pools remain closed, and housekeeping doesn’t refresh rooms daily. Some guests feel like they are getting less for their money.
InterContinental Hotels Group
PLC, which owns Holiday Inn, said it has been working with hotels to return amenities and make it right if guests aren’t satisfied. “Hotel teams have been overcoming many challenges including supply chain and labor shortages, changing health guidance and regulatory requirements,” an IHG spokesperson said.
On a recent trip to St. Louis, Meg Hinkley booked a Holiday Inn because it said online that it offered room service. When she arrived, the restaurant was closed, so there was no room service. She said she would have stayed at a lower-priced hotel if she had known. “I was paying for that convenience.”
—Heather Haddon and Bob Tita contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com and Gabriel T. Rubin at gabriel.rubin@wsj.com
The makers of some of the world’s bestselling food and drink brands warned they would keep raising prices as they grapple with the strongest inflation in years.
Nestlé SA, Diageo PLC, Anheuser-Busch InBev SA and Danone SA all said Thursday that sales were rising as key markets rebound from the pandemic, but that the recovery was also leading to rapidly increasing costs for ingredients, packaging and transport.
Nestlé said its ice creams had gotten more expensive, spirits giant Diageo has raised prices on brands like Baileys and Casamigos tequila, and Budweiser brewer AB InBev is exploring higher prices for its beers. Meanwhile, Danone, which makes Activia yogurt and Evian water, said it would increase prices across all of its categories to try preserve its profitability.
“We do expect price increases to accelerate from what you saw in the first half,” said Nestlé Chief Executive Mark Schneider. “After several years of low inflation, all of a sudden it accelerated very strongly starting in March and is continuing to accelerate.”
Companies across many sectors are contending with rising costs from coffee to aluminum and shipping as the recovery from Covid-19 gains steam. That is leading to higher prices for many goods, pushing U.S. inflation to rise at the fastest pace for more than a decade.
