January 10, 2019
In the latest confirmation that global auto sales are sliding and that US automakers are struggling to compete in the hypercompetitive European car market – something that President Trump might interpret as another reason to press ahead with auto tariffs presently being studied by the Commerce Department – Ford has announced a massive ‘restructuring’ of its European operations, following in the footsteps of GM’s much broader restructuring, that will entail thousands of job cuts and possibly factory closures.
The cuts are hardly a surprise after the carmaker’s foreign profits have plunged over the past two years thanks in part to exchange rate-related losses spurred by the strength of the dollar, as well as poor sales of its diesel models. According to the BBC, which broke the story, Ford will lay off ‘thousands’ of workers and contemplate factory closures. Ford’s decision to curtail its European operations comes two years after GM sold its European subsidiary to French carmaker Peugeot.
The FT reported that Ford employs 53,000 people in Europe (13,000 in the UK alone) across 15 factories, including two engines plants in the UK at Bridgend and Dagenham. The Bridgend plant in particular could be in danger because Ford lost a major contract to build engines for Jaguar Land Rover in 2020. Meanwhile, Ford’s Dunton Technical Centre in Essex could potentially benefit from new investment in the commercial vehicles
Globally, the automaker is targeting $14 billion in cuts outside North America to try and revive its international business. Analysts have projected that the company could shed up to 24,000 of its international employees as it struggles to reach its 8% profitability target by 2020 (which would put Ford back ahead of Fiat Chrysler). In the region, Ford is targeting profitability of 6% after the restructuring (something it has never before achieved).
Its restructuring will focus on culling its offerings to only the most popular models while exiting markets where performance has lagged. The carmaker is also in discussions with unions to save costs, while planning to expand its profitable commercial vehicle business.
Every part of Ford’s business will face a review as the carmaker “tears up its strategy” for competing on the Continent (and in the UK).
“This is not about making the business today more efficient but completely redesigning it,” Ford’s European president Steve Armstrong told the Financial Times.
Mr Armstrong said Ford intended to stay in Europe, but that “everything is possible if we can’t get the reset done.”
News of the European restructuring follows the company’s decision to shutter most of its car brands in North America as it focuses on popular SUVs, pickup trucks and its Mustang sports car.
A similar pattern appears to be playing out in Europe, though the company said it intends to focus on the “mass market” segment. Its European arm will be subdivided into three segments: Commercial vehicles, passenger cars and imported vehicles. In a partnership expected to be announced next week, Ford plans to work with VW on commercial vehicles.
In Europe it has begun winding down the C-Max small minivan, and will “look at the line up, Fiesta, Focus, Mondeo, everything else,” said Mr Armstrong.
All new models sold in the region will come with an electric or hybrid option, as the carmaker tries to lower the CO2 output of its fleet ahead of stringent EU targets that come into force next year.
After a year of abysmal auto sales – and ahead of what’s expected to be another difficult year – Ford last week joined rival GM in saying it would no longer report monthly car sales after reporting a 9% drop for December. Despite the Trump tax cuts having goosed its bottom line, the underperformance of Ford’s shares last year portends more cuts ahead – likely in its flagship North American market, which would could potentially elicit blowback in Washington (see Trump’s furious response to GM’s decision to cut 15,000 jobs in North America).
This article was posted: Thursday, January 10, 2019 at 7:53 am