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Ford planning to cut 18% of production capacity, 13% of workforce in Europe; anticipating more than $1.5B loss in Europe in 2012

New car registrations in the EU, 1990-2011. Source: ACEA. Click to enlarge.

Addressing manufacturing overcapacity stemming from the more than 20% drop in total industry vehicle demand across Western Europe since 2007, Ford this week has outlined a series of cost efficiency actions including the planned closure of three European facilities: its Genk Plant (Belgium); a vehicle assembly plant in Southampton (UK), which builds the current Transit; and stamping and tooling operations in Dagenham (UK). The plans would reduce installed vehicle assembly capacity 18% or 355,000 units and would yield gross annual savings of $450 million to $500 million.

The actions—along with a previously announced initiative to reduce approximately 500 salaried and agency positions across Europe, with the Ford salaried reductions achieved voluntarily—affect 6,200 positions or about 13% of Ford’s European workforce.

That includes 4,300 positions in Genk and 1,400 positions in the UK. Ford’s goal is to achieve employee reductions in the UK through voluntary means, enhanced employee separation programs and redeployment to other Ford locations. Actions in Genk are dependent on the outcome of the ongoing employee consultation process.

New vehicle sales in Europe have reached a nearly 20-year low this year and are expected to remain flat or fall further next year. The plan, which would significantly improve plant utilization in Europe, includes the following elements:

  • Ford has initiated an information and consultation process with representatives of employees at its Genk facility regarding the company’s intention to close the plant and cease vehicle production by the end of 2014. If confirmed, production of the next-generation Mondeo, S-MAX and Galaxy could move to Ford’s assembly plant in Valencia, Spain.

  • Pending further study, production of the C-MAX and Grand C-MAX compact multi-purpose vehicles would move from Valencia to Saarlouis, Germany, in 2014 under the proposed plan.

  • Ford plans to close the two facilities in the UK in 2013. Manufacture of Transit will be consolidated in Ford’s principal commercial vehicle manufacturing facility operated by Ford Otosan in Kocaeli, Turkey, in 2013.

  • UK operations will remain a Ford center of excellence for powertrain development and production. This includes plans to add a new next-generation, low-CO2, 2.0-liter diesel engine in Dagenham that will power future Ford vehicles from 2016. The engine will be developed at Ford’s Technical Centre in Dunton, Essex, one of the largest automotive R&D centers in the UK. Additional investment also is expected at Ford’s Bridgend Engine Plant in South Wales to support ongoing high volumes of gasoline engine manufacture.

The challenges facing the European car industry have become more structural than cyclical in nature and require decisive action. The actions we are proposing come after extensive review and consideration, and we fully recognize and accept Ford’s social responsibilities in this necessary transformation of our business. Going forward, we will as always continue to review all areas of the business and take appropriate actions to strengthen our business.

—Stephen Odell, chairman and CEO, Ford of Europe

Ford Europe posted net revenue in 2011 of $34 billion, representing 26% of Ford Automotive revenue. Its European loss for 2012 is expected to exceed $1.5 billion. Ford is projecting profitability in Europe by mid-decade and targeting a long-term operating margin of 6-8%.

Product acceleration. Ford last month detailed an aggressive product acceleration in Europe. Specific product announcements include:

  • Plans to introduce 15 global vehicles in Europe within five years as Europe increasingly benefits from the One Ford global product portfolio.

  • New Fiesta, on sale later this year, redesigned inside and out with new technology offerings, and sub-100 grams per kilometer with both diesel and petrol powertrains; also, new Fiesta ST performance version coming next year.

  • New Mondeo, an all-new version of Ford’s large European car. The new Mondeo, available with the award-winning 1.0-litre EcoBoost and all-wheel drive, will now be launched in late 2014, if the plans for Genk are confirmed.

  • Expansion in the growing European SUV segment, starting with the all-new Kuga later this year; followed by the EcoSport small SUV within 18 months; and later, Edge, a larger utility vehicle that is popular in other regions.

  • A complete redesign and expansion of its commercial vehicle range over the next two years, including new Transit, Transit Custom, Transit Connect and Transit Courier —plus a family of new Tourneo people carriers.

  • The arrival of the Ford Mustang in Europe.

  • An acceleration of the rollout of new technologies including EcoBoost engines, SYNC in-car connectivity, inflatable rear seat belts, MyKey and other driver assist technologies such as Active Park Assist.

The European market holds potential for profitable growth if we accelerate product development and move decisively to address our costs and overcapacity.

—Stephen Odell

Other actions. In recent months, Ford has taken other actions across its operations in Europe in response to the downturn in Europe. These include reducing line speed, short-time working days and lay-off days. The company also has reduced temporary employment in several plants.

Ford also is making a strategic shift to reduce vehicle inventory at its European dealerships. While Ford has maintained relatively lean stocks, recent improvements in vehicle logistics and IT systems have sped order-to-delivery, enabling this change. The new business practice will have a long-term positive effect on profits for both Ford and dealers, while customers will benefit from fresher vehicle inventories, quicker delivery and improved resale values.

Additionally, the company is taking marketing efficiency actions, including the announcement last week that it will stop participating in the FIA World Rally Championship as a factory team after the 2012 season.



Is this another case of moving production facilities where future markets will be and/or where production cost is lower?

Bob Wallace

I suspect it's more a case of responding to Europe's attempt to cut spending as a way to restart its economy.

Cutting government spending when economic activity is down is not how you get economies going. Cutting government spending means only one thing - putting more people out of work. The government does not spend its money on caviar, extra mansions or car elevators. The government pays salaries to employees and purchases services from businesses that employ people.

Until Europe (and another government that we all know) increases spending we are going to continue to experience slow growth. Spend now, get people back to work, generate tax revenues, and then make needed cuts.


BW...we are saying the same thing using different words. Ford and others have to and are moving with the market. With EU's and US's economy snail pacing or going down, so will demand for cars. Asia and South America may represent better future markets? Another reason is much lower production cost.

In the not too distant future, the flow of new cars will be from Asia-South America to EU-US unless we can become more competitive.


BW is absolutely right, economics in action.


Or is it greediness from speculators, banks, the 3%, big unions, organized crime, widespread corruption, etc that have progressively priced USA and EU out of the world market?

Empires are not always defeated by outside forces but are most often undermined from within. Isn't that what is happening in USA and EU? $7+B elections may be indicative of how far we've gone?

Bob Wallace

I don't worry about US car manufacturers. Manufacturing has become so automated that low labor costs are not as effective as they once were in creating market advantage.

Add in the cost of shipping and what we are likely to see is more in-country manufacturing. The cars driven in North America will largely be built in NA. The cars driven in China will be driven in China. Most car manufacturers will have plants around the world.

GM has made a very good start toward electrics with the Volt and they're going to have an EV soon. Ford has an EV and is apparently moving toward a lot of hybrids. Chrysler will play a game of catch-up as it generally does.

Car manufacturing is going to get very interesting as soon as we have "200 mile range" batteries. At that point someone will be able to open a car company without the need to manufacture engines. Just order batteries and electric motors from suppliers. Our model options should greatly increase. Tesla has pretty much shown the way.


Yes car manufacturing will get to be very interesting when 200 (*) to 400 miles (**) range affordable batteries become available.

Guess where the majority of batteries, e-motors, control units, wheels, brakes, chargers, cables, displays, EV computers, radio, speakers, steering wheels, tires, lighting units, suspension and steering units etc will come from?

(*) The Tesla S 85 kWh and the BYD e6 72 kWh can do much better than 200 miles already.

(**) Many e-cars with 100+ kWh batteries and 400 miles range will be around by 2017/2018.

(***) Technology evolution will make both the battery and car body 30% to 50% lighter be the end of the current decade.


One of the most basic tenants of economics is that taxes are a drag on the economy. So how will increasing government spending and increasing taxes help anything? People like Bob Wallace and Harvey, with his never ending asinine comments, make the green movement look so stupid.

Bob Wallace

frankr - you're just wrong. The US has had great economic success in the past with much higher taxes than it has today. Taxes are not what is holding things back, corporations and wealthy individuals are sitting on immense fortunes in cash.

What's holding the US back is the fact that the middle class doesn't have the money to spend it used to have. The rich are hording the money.

With people having little money for things other than the basics our markets are destroyed. Corporations don't want to produce good for a nonexistent market.

Business has forgotten what Henry Ford knew. You have to pay your employees enough to purchase your products if you want anyone around to buy what you produce.

The wealthy will only install a very limited number of car elevators.

Bob Wallace

"Guess where the majority of batteries, e-motors, control units, wheels, brakes, chargers, cables, displays, EV computers, radio, speakers, steering wheels, tires, lighting units, suspension and steering units etc will come from?"

From those places where they can be sold at the best price when the product reaches market.

As China's labor costs rise and more manufacturing is automated along with the cost of shipping more and more manufacturing will happen close to market.


That's wishful thinking. If it were true communist countries would be the world leaders right now. Romney's right when he says the rich will be fine no matter how much you tax them, it's the poor who lose their jobs when the rich can't afford to pay them anymore.

You and I are both entitled to our opinions, but mine is backed by economics. No economist in the world will tell you that you can build an economy on government spending. It's like A.D's silly comments that we should put electrolizers in fuel cell cars, so that regen braking could produce the hydrogen to power the car; it would be wonderful if it were true, but it doesn't work.


I agree with BW. China is a hybrid, neither totally capitalist nor totally communist. That is a different category.

Roger Pham

Neither the GOP nor the DEM have the knowledge or the courage to do what it takes to improve the economy. Tax cut for the rich is no panacea, nor government spending to produce $1 trillion-a-year deficit can do it.

To have a healthy economy, the gov. must work together with industries and labor to promote PRIVATE investments into promising areas of new technologies, such as renewable energy, environmental preservation, electric vehicles and H2 economy etc. The PRIVATE dollars from the rich must go into the economy to create jobs. Job outsourcing must stop!

For the Europeans, deep gov. cutback will only create more injury, like the human body in septic shock and the blood vessels are clamping down...soon, gangrene will occurs to the hands and feet, and major organs will fail. Instead, the Europeans must develop solar energy from southern sun-rich regions to spur the economy there, and develop HVDC lines to carry energy to the richer Northern countries, whereby H2 can be produced and stored locally for use in the winters. These activities will create tens and hundreds millions of European jobs and will lift Greeks, Spain, etc out of the crises, just like the end of WWII. These jobs will continually be needed forever to clean the mirrors and the service the solar plants and the HVDC lines. High maintenance, yes or may be, but good for the economy!

Solar thermal plants will have thermal energy storage to keep producing electricity at night to feed their northern neighbors, so that they can really wean off fossil-fuel energy and no longer dependent on Russia's supply of NG, nor the Middle East for oil...


The relative location of raw materials, labor/production/sales depends on many factors.

How bad were/are US labor/union costs when Nissan, Toyota and Honda can compete by shipping Armadas, Titans, Tundras, Ridgelines and Land cruisers to the US market.

But Spain and Greece are on the right course. They are wisely resisting pressure to substantially cut government spending.
Increased government spending means only one thing - putting more people on the payroll.

The government pays salaries to employees and so purchases fewer services from businesses that employ people - it makes no difference if the gov workers they actually work to produce what people want (AND the people should get what the government decides they should have, NOT what they want).

The greediness of the people (speculators, banks, the 3%, big unions, organized crime, widespread corruption, etc) has progressively priced USA and EU out of the world market while the government and our selfless politicians will be our salvation.

Car manufacturing is going to get very interesting as soon as we have "200 mile range" batteries. Today’s EV market may be small (OK; “really small”) - but, by 2017 it will exceed 5% ! and . .
Umm , well, never mind.

And yes, frankr may be correct when he thinks that that taxes are a drag on the economy but people like Bob Wallace and Harvey believe that increasing government spending and increasing taxes will help - why? just because they dream it will – and we all know that dreams are precious.

Speaking of dreams, do not forget that “The wealthy will only install a very limited number of car elevators.”

And frankr does not realize that communist countries ARE the world leaders right now in the things that count; Cuba has the best health care in the world (Michael Moore has proven this) and North Korea and Cuba are poised to become world powers (along with Greece, Spain Ireland, Italy and Portugal).

Romney may be right when he says the rich will be fine no matter how much you tax them; it's the poor who lose their jobs when the rich can't afford to pay them anymore.

The government has the right to blame them take their money; we can crush them and their sky scrapers TODAY – we’ll call it “Crystal Tag” .

Activities like Fisker, Solyndra, A123 and other green industries could have created tens and hundreds of millions of jobs (they did not, but they could have) and may never be able to lift Greek, Spain, etc out of the crises, but they could have – maybe a WW can.

Just cleaning the mirrors will be a huge boost for the economy!

Bob Wallace

frankr - can you not see the logical problem with this statement you made?

"Romney's right when he says the rich will be fine no matter how much you tax them, it's the poor who lose their jobs when the rich can't afford to pay them anymore."

Tax the wealthy 100% of income and capital gains and they won't be fine.

But tax the wealthy 90% of income and capital gains and they will work a lot harder to create jobs in order to rebuild their spendable income.

Right now the wealthy are sitting on most of our wealth and doing nothing with it to help the country. They're buying bigger yachts from other countries and paying a hundred million dollars for paint on a piece of canvas.

The wealthy like Romney are not creating jobs, outside of a few construction jobs building car elevators. Once people reach a net worth of ten million or so they tend to quit trying to increase income and move into a capital protection mode.

Jobs are created by people who are far from wealthy. Calling people like Romney "job creators" is as big a lie as Iraq having weapons of mass destruction.

America needs a strong middle class. And a strong middle class means better conditions for those who haven't yet made it into the middle class. We can't have a strong middle class if <1% of the population is hoarding the country's wealth.

If we don't build our infrastructure and our educational systems but allow the very wealthy to keep grabbing everything of value we will become like an old burned out country ruled by the aristocracy who are hidden away in their castles enjoying lavish feasts while the rest of us struggle for a crust of bread.

That is not the American our forefathers set out to create.

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