Ford Europe to Cut Thousands of Jobs in Turnaround Plan

Date: January 10, 2019
Source: Bloomberg, Reuters, Automotive News
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 today, 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.
Ford, in its statement, said it also plans to leverage relationships, “including a potential alliance with Volkswagen AG, to support commercial vehicle growth.” Ford and VW could announce details of an alliance on Jan. 8 at the Detroit auto show.
“We are looking to make a step-change in the performance of the business,” said Steven 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 told Bloomberg
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 percent profit margin target for Europe. The company did not give a timeframe 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 minivans. Ford has already said it will cease production at a plant in Bordeaux, France, and has started labor talks at the Saarlouis factory in Germany after a decision to end production of the C-Max compact van.
The automaker, which currently employs 53,000 people in Europe, has struggled to turn a profit, posting a 245 million euros loss before interest and taxes in the third quarter, widening from $192 million a year earlier, and equivalent to a negative 3.3 percent EBIT margin.
Armstrong declined to quantify the scale of job cuts, pending negotiations with labor leaders, but said staff reductions would run into the “thousands.”
Voluntary Separations
“Ford aims to achieve the labor cost reductions as far as possible through voluntary employee separations in Europe,” the automaker said.
Ford’s European business currently relies on models such as the recently revamped Fiesta and Focus hatchbacks.
Ford, whose business in Europe includes a “solidly profitable” commercial vehicles unit, said it will establish three separate groups for passenger cars, its vans business and imports like the iconic Mustang.
“We are continuing to invest in the business, especially in electrified cars,” said Armstrong. “We will still have a comprehensive lineup of cars in future with primarily SUVs and crossovers.”
Over the long term, Ford is targeting earnings before interest and taxes of 6 percent of sales in Europe. This year, performance will already be “significantly better” than 2018, Armstrong said.
Ford last year kicked off a company-wide $11 billion restructuring after both Europe and Asia swung to losses and costs to invest in electric and self-driving vehicles mount. Like many other carmakers, Ford has warned it won’t meet its forecasts for 2018, and CEO Jim Hackett jettisoned a goal to reach an 8 percent profit margin by 2020.
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