The world of investing is a complex and interesting place. Every day, there are a plethora of situations that simply don't seem logical on the surface. A company reports great earnings, only to see its stock tumble. Another company misses its own estimates, yet some bit of information sends its stock to new highs. Even a company on the verge of bankruptcy can watch its stock soar. One case that seems to fit this last scenario is the recent announcement from Ford (NYSE:F).
Much like its big cousin last month, General Motors (NYSE:GM), Ford is working on plans to cut costs, hoping to return to profitability. Though the plan isn't finalized, and won't even be announced publicly until Jan. 23, estimates are for layoffs of 30,000, and up to 10 plants being closed in North America within five years.
The proposal, which Ford is weakly trying to put a positive spin on by referring to it as the "Way Forward," is much larger in scale than what was reported earlier. Previous guesses have varied from 7,000 lost positions and three plant closures to Bill Ford, Jr. announcing the cutting of 20,000 jobs. This new plan is also said to include the departure of seven top executives.
Ford said it would not comment on "speculative scenarios" and maintains the plan will be announced in January and "won't be solely about cutting costs." The company will also work more on updating its vehicle lineup to lure buyers back to its showrooms without having to tempt them with huge rebates.
So 30,000 people are going to lose jobs, plants are shutting their doors, sales continue to slump, and the stock goes up (slightly). While this looks like a last-gasp effort, and I myself wouldn't touch the stock, I understand why some may be pleased by the news. Ford clearly realizes that time is running out. It's already been passed by Toyota (NYSE:TM) and continues to lose ground. It's addressing its cost issues and realizes the need to produce more appealing vehicles.
Trying to figure out where Ford is going to end up is like trying to drive in the dark with no headlights -- neither easy nor advisable. The road ahead will be dark and bumpy until Ford can consistently build vehicles consumers demand, at a rate and with a workforce that allow it to remain profitable. But Ford (as well as GM) needs to act fast -- before China manages to establish a position in the market.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of any of the companies in this article.
