Three production facilities in the UK and Belgium will be downsized or shuttered
Wayne Gerdes - CleanMPG
- Oct. 25, 2012
Look at the following for reasons that Ford needs to “execute” the forced reduction plan ASAP…
European car sales crash by 11% to 1.1m in September as eurozone crisis hits
This morning Ford released details of its plan to achieve profitability from its European operations through facility closures, belt tightening and even more new products.
On the product side, Ford announced plans to launch or target larger cars, sport utilities and commercial vehicles. With gasoline and diesel closing in on $10 USD per gallon in some European locations, larger cars and SUVs may not be the right direction?
Ford said they plan to introduce 15 global vehicles in Europe within five years.
Ford EU restructuring plan includes the planned closure of three European facilities, relocating production of key products for a more efficient manufacturing footprint, significantly improving plant utilization and multiple thousands in employee layoffs. The planned actions will reduce installed vehicle assembly capacity, excluding Russia, by 18 percent or 355,000 units. Ford projects the gross annual savings to come could range from $450 million to $500 million annually.
From the Ford release, the facility closures include two UK facilities beginning next year – Ford’s assembly plant in Southampton, and stamping and tooling operations in Dagenham. Ford also plans to end production at a major assembly plant in Genk, Belgium, by the end of 2014, pending confirmation following completion of a consultation process with employee representatives. These three facilities currently employ approximately 5,700 hourly and salaried employees.
Alan Mulally, Ford President and CEO added the following within the prepared statement:
“We will address the crisis in Europe with a focus on new products, a stronger brand and increased cost efficiency. We recognize the impact our actions will have on many employees and their families in Europe, and we will work together with all stakeholders during this necessary transformation of our business.”
Tough language and from all appearances, it has to be done
The new (refreshed) Fiesta will go on sale later this year with the new Fiesta ST performance version arriving sometime next.
The all-new 2013 Mondeo (2013 Fusion here) should make a splash and will even be available in late 2014 with the 1.0L EcoBoost and AWD. 3,500 + pounds propelled by a 125 HP small displacement engine will be an interesting choice for the EU market place. I hope it is accepted more so than the 1.6 and 12.0L turbo diesels but I have reservations.
In addition, Ford is ramping up small SUV expansion with its all-new Kuga (similar to the all-new Escape here) later this year; followed by the EcoSport small SUV within 18 months.
Where it could get really dicey is Ford wants to bring the large Edge CUV to the EU. The Edge in its mot fuel efficient US form (FWD with the 2.0L EcoBoost) is a 24 mpgUS combined rated vehicle. Gasoline at $10 USD per gallon and 24 mpgUS combined = $1.00 US for every 2.4 miles traveled. Of course the NEDC will give it a higher combined but in actuality, it will probably achieve worse? Let us hope there is a fuel efficient small diesel under the hood once it arrives?
On the Commercial front, Ford is planning a complete redesign and expansion of that 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 company is also releasing the Mustang to the EU enthusiasts and while it will most certainly attract attention, $10 per is going to put a damper on any kind of real market penetration.
Ford will strengthen its brand in Europe by investing in innovative, integrated marketing support for new products, accelerating product development; grow the retail and commercial fleet business and strategically reducing dealer stock levels for the benefit of Ford, its dealers and consumers.
Ford stated that manufacturing overcapacity stems from the more than 20 percent drop in total industry vehicle demand across Western Europe since 2007. New vehicle sales in the region have reached a nearly 20-year low
this year and are expected to remain flat or fall further next. The plan, which would significantly improve plant utilization in Europe, includes the following:
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 review, 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 two facilities in the UK in 2013 – a vehicle assembly plant in Southampton, which builds the current Transit; and stamping and tooling operations in Dagenham.
Ford said its UK operations will remain a center for powertrain development and production. This includes plans to add a new next-generation, low-CO2, 2.0L turbo diesel engine in Dagenham that will power future Ford vehicles beginning in 2016. Additional investment also is expected at Ford’s Bridgend Engine Plant in South Wales to support ongoing high volumes of petrol engine manufacture.
Manufacture of Transit will be consolidated in Ford’s principal commercial vehicle manufacturing facility operated by Ford Otosan in Kocaeli, Turkey, in 2013
If all goes according to plan, the Genk facility in Belgium is finished by the end of 2014.
The actions announced today - 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 percent 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.
On the line
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.
The announcements come against the backdrop of the severe and persistent economic crisis in Europe and a projected loss for Ford Europe for the full year 2012 exceeding $1.5 billion. This includes more than $400 million related to dealer stock reductions, and about $100 million of accelerated depreciation associated with planned manufacturing footprint actions.
In the release, Ford just as its counterparts are projecting profitability in Europe by mid-decade, driven by higher industry volume and market share, growth in emerging markets, richer mix and improved contribution margin, as well as a more efficient manufacturing footprint. A partial offset will be higher structural costs as the company reconfigures and grows its business. The company said it is targeting a long-term operating margin of 6-8 percent for Ford Europe.
I can only hope that this projection holds some validity but with gasoline, diesel and the cars themselves being taxed to the point of being unaffordable by the lower and middle income classes, new car purchase and ownership within the EU is being destroyed faster by taxation then the EU debt crisis and may continue to do so with policies meant to destroy jobs rather than nurture them.
Ford also said that the company will have better third quarter earnings than the second quarter excluding special items despite the substantial loss in Europe. Ford will announce its full third quarter financial results on Oct. 30.
What a lousy business environment and business to have to manage nowadays