Ford eyes plant closures as it wields ax in Europe

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Photo by Ford Company to concentrate on profit-making SUVs and commercial vehicles and cutting unprofitable model lines

Ford will shed thousands of jobs at its European operations in a bid to return the business to profitability in a broad restructuring that may include shutting down production plants.

Ford has struggled with an aging model lineup and a contracting market in the UK, Ford’s biggest in Europe, which is in store for further disruption from Brexit.

In a statement on 10 Jan Ford said it will seek to exit the multivan segment, review its operations in Russia, and combine the headquarters of Ford UK and Ford Credit to a site in Dunton, Essex.

"We are looking to make a step-change in the performance of the business," said Steve Armstrong, Ford’s head of Europe. “There will be significant impact across the region. We will be looking at all options,” which could include plant closures, he said.

"A review of the manufacturing footprint is part of this process," Armstrong said.

Any layoffs and plant closures at Ford would be subject to the outcome of formal negotiations with labor representatives, Armstrong said, adding that he hoped that job cuts could be achieved by "voluntary means." He declined to quantify the scale of job cuts, pending negotiations with labour leaders, but said staff reductions would run into the "thousands."

The cost-cutting plan has not been adjusted to account for the possibility of a 'hard' exit by Britain from the European Union without securing tariff-free cross-border trade, Armstrong said. "If Brexit went in the wrong direction we would have to have another look, to mitigate that," Armstrong said.

A Ford spokesman said the carmaker currently assumes that any Brexit deal would keep tariff-free trade between Britain and Europe.

Ford announced in December that it was working on a restructuring plan for Europe called Sprint to 6 Reset and Redesign. The name refers to Ford’s 6% profit margin target for Europe. The company did not give a time frame for the target.

Ford has said the plan will involve concentrating on its profit-making SUVs and commercial vehicles and cutting unprofitable model lines, thought to refer the Galaxy and S-Max large minivans.

Ford has already said it will cease production at a plant in Bordeaux, France and has started labour talks at its Saarlouis factory in Germany where 6,190 staff build cars as it considers ending production of the C-Max compact van.

"We will migrate out of the MPV segment," Armstrong said, referring to minivans.

Small diesels dropped, new business units

The company is unlikely to develop next-generation diesel engines for smaller vehicles, Armstrong said, explaining that customers have been abandoning the segment more aggressively than anticipated. Going forward Ford will seek to offer an electric or hybrid version of all its vehicles and the electrification plans are not contingent on striking a deal with Volkswagen, he said.

Ford said on 10 Jan that it also plans to leverage relationships, "including a potential alliance with Volkswagen, to support commercial vehicle growth." Ford and VW could announce details of an alliance on 15 Jan at the Detroit auto show.

The automaker, which currently employs 53,000 people in Europe, has struggled to turn a profit, posting a €245m loss before interest and taxes in the third quarter, widening from $192m (€166m) a year earlier, and equivalent to a negative 3.3% EBIT margin.

Ford said it will establish three separate groups in Europe for passenger cars, its vans business and imports such as the iconic Mustang. It said its commercial vehicles business in Europe is “solidly profitable.”

“We are continuing to invest in the business, especially in electrified cars,” Armstrong said. “We will still have a comprehensive lineup of cars in future with primarily SUVs and crossovers.”

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