Ford has unleashed a second volley of European job cuts and plant closures in a bid to halt regional losses that the automaker now expects to surpass $3 billion (R26 billion) over two years.
Ford told British unions on Thursday it would scrap its Southampton van factory and an associated stamping facility in Dagenham in mid-2013, slashing 1400 jobs and ending vehicle manufacturing by Ford in Britain.
The move comes a day after Ford announced it would close a major car plant in Genk, Belgium, in late 2014. In all, Ford cut 6200 jobs and reduced European production capacity by 18 percent to save $450-500 million (R3.9-4.4 billion) a year.
Ford also said it expects to lose more than $1.5 billion (R13 billion) in the region this year, up from its earlier $1 billion (R8.8 billion) forecast. Ford expects a similar loss in 2013, when the European car sales are expected to be, at best, on par with 2012 levels.
“We are really trying to reflect the reality” of the economic slowdown and industry downturn in Europe, Chief Executive Alan Mulally told analysts and reporters on a conference call.
“That's why we need to move decisively now.”
With no market recovery in sight, car makers are struggling to scrap underused factories and cut surplus jobs that are fueling losses in Europe. The Southampton plant was the fourth European vehicle plant closure announced this year.
Workers at Ford's British plants were distraught. “It's a kick in the teeth,” said Dominic O'Callaghan, a shop steward at Dagenham. “The guys worked hard.”
Thursday marked the second time this year Ford has boosted its estimated loss for Europe, reflecting the rapid, surprising deterioration in a region where Ford lost $27 million (R237 million) last year.
In early 2012, Ford forecast a loss this year of up to $600 million (R5.3 billion) in Europe. In July, that estimate ballooned to $1 billion (R8.8 billion). Now Ford says it will lose at least $3 billion (R26 billion) this year and next, when vehicle sales in Europe are expected to hover at or below 14 million.
“If you had asked me two years ago, I would have said that's the trough,” Stephen Odell, Ford's head of Europe, said on the conference call. “It's difficult to predict. It does feel like we're running at a very low level.”
GRIM WEEK
Ford's actions cap a grim week for the industry. Chinese-owned Volvo said it was cutting production in Belgium, while Germany's Daimler warned that profit margins would not improve in 2013.
Ford's plant closures will not be enough to address the industry's broader problems. Guggenheim analyst Matthew Stover estimates that production capacity in Europe outstrips current demand by nine million vehicles.
To cope with the flagging market, Ford has cut marketing and advertising costs, offered buyouts to salaried workers and taken out “any flex we saw in the system,” Odell said.
But executives also left open the possibility of further actions if a recovery in Europe fails to materialise.
“What we'll continue to do is look at the reality that we're facing, just like we do every day, all the time,” Chief Financial Officer Bob Shanks said. “We'll respond as appropriate to strengthen the business.”
Shanks said Ford should post a smaller European loss in 2014 before being profitable in the region by mid-decade. Ford is aiming for operating margins between six and eight percent in the medium term.
PEUGEOT, GM
During the conference call, Odell raised questions about the legality of PSA Peugeot Citroen's recent French government-backed $9.1 billion (R80 billion) refinancing deal. PSA has encountered stiff government and union resistance to 8000 planned job cuts and the closure of its Aulnay plant.
Meanwhile, General Motors' Opel division is in protracted talks to slash jobs and close its Bochum plant in Germany - but not before 2016.
“What's remarkable about Ford is how quickly things are moving, which is a sign of good management,” said London-based UBS analyst Philippe Houchois. “With GM Europe, you always wonder what's going on - it looks like they are still bogged down in deciding what to do.”
“INDUSTRIAL COURAGE”
Future versions of Ford's Mondeo, S-MAX and Galaxy, currently assembled in Genk, will be moved to the automaker's plant in Valencia, Spain. The new Mondeo, which made its public debut in September at the Paris show, will be introduced in late 2014, at least 18 months later than originally scheduled.
Southampton's production, which last year fell short of 30 000 vehicles, is to be transferred to Ford's existing Transit plant in Turkey, under the plans announced on Thursday.
Ford's stamping and tooling plant in Dagenham, Essex, will also close next year, the company said. The facility employs 930 workers.
Staff in Southampton were told to down tools and take the day off as news of the closures broke, and most said they were heading to the pub. The US automaker currently employs 11 400 British workers at sites including Halewood, near Liverpool, and Bridgend in South Wales.
NEW ENGINE
Britain would remain a centre of “powertrain excellence” for the automaker, Odell said.
The company announced a “next-generation low-CO2 two-litre diesel” to be made in Dagenham that would power future Ford vehicles from 2016. It also said additional investment was expected at Bridgend to support ongoing high volumes of petrol engine manufacture.
“Ford is demonstrating the vision and industrial courage to make tough decisions today that will pay off in the long term,” Morgan Stanley analyst Adam Jonas said in a note to investors.
Jonas, who had previously expected Ford to continue reporting European losses through 2015, said its restructuring measures could bring the breakeven forward one year. -