National Post (National Edition)
Ford, Jaguar to slash thousands of jobs on Brexit
MUNICH/LONDON • Ford Motor Co. and Jaguar Land Rover said Thursday they will cut thousands of jobs in response to the sales slowdown caused by Brexit, flagging demand for diesel-powered vehicles and a downturn in China.
Ford said it will also weed out slow-selling models and potentially close factories in Europe, as the carmaker’s global cost-cutting drive targets a region that has dragged on earnings for years. The automaker, which employs some 54,000 workers across the region mainly in Germany, the U.K. and Spain, will also review its joint venture in Russia, part of a host of measures that Steven Armstrong, Ford’s head of Europe, called a “step-change in the performance of the business.” He didn’t specify the number of possible job cuts and said that plant closures are an option to streamline operations.
“There’ll be significant impact across the region,” Armstrong said. “This isn’t a one- or two-year issue. We have had periods of profitability but not on the level it should be.”
Jaguar Land Rover, the U.K.’S biggest automaker, said it plans to slash 4,500 jobs worldwide. The cuts, roughly 10 per cent the workforce, are part of a Us$3.2-billion push announced last year to reduce costs and boost cash flow through 2020. They come on top of the 1,500 people who left the company in 2018.
Jaguar, a symbol of British carmaking, and Ford are both vulnerable to a U.K. market that tumbled the most in 2018 since the depths of the financial crisis. That could get worse in a hard Brexit, while carmakers across the globe grapple with a downturn in China and pressure to invest in electrified and autonomous cars.
Brexit played an indirect role in the decision, Jaguar Land Rover chief executive Ralf Speth said on a conference call, citing the U.K. automotive market’s 6.8-per-cent drop in 2018. He said the company has limited capacity to stockpile parts to prevent disruptions in the case of a hard Brexit, given it turns out 3,000 vehicles a day.
“We build even more engines, so we need about 25 million parts per day and stockpiling that amount is difficult,” Speth said.
The job cuts announced Thursday will affect mostly workers in the U.K., including contractors, senior management, supervisors, engineering, and design workers, according to people familiar with the matter who asked not to be named discussing details that weren’t announced. Production-line workers won’t be affected, they said.
Jaguar, owned by India’s Tata Motors Ltd. , employed more than 43,000 people during the 2018 financial year. The company said it would start a voluntary buyout program and implement a flatter management system as it increases investment in areas such as electrification.
As the global car market shows first signs of a slowdown after years of growth, Ford has overhauled its global operations, exiting the sedan business in America to focus on bigger vehicles and shifting its Chinese business to more local production. Europe has been particularly tough for the company because of the key market in the U.K., where the chaos surrounding Brexit has thrown up an additional challenge for the company.
The overhaul marks another sign of pressure on traditional automakers as they grapple with fundamental technology changes, tougher environmental regulations and trade tensions.
Ford was among U.S. carmakers that fell short of expectations when the industry presented sales for last year, adding to concern that a slowdown may occur in 2019. China, which has fuelled the industry’s growth, disclosed on Wednesday that auto sales fell for the first time in more than two decades.
Armstrong said on a call that the future of the European operations lies in crossover vehicles and SUVS, and that sedans and compact vans are in decline. He cautioned that whatever action the company takes might have to be significantly more dramatic should a no-deal Brexit occur at the end of March.
Ford’s debt has been trading like it’s speculative grade, and Moody’s Investors Service cut the carmaker’s credit rating to one step above junk in August. Analysts have speculated Ford’s generous dividend may be at risk.
Volkswagen AG, which is in talks with Ford about a deeper alliance, said Thursday its namesake brand will redouble its focus on returns amid another year of “enormous challenges,” foreshadowing more belttightening. Audi, VW’S biggest profit centre, likewise noted more struggles ahead, reporting a 3.5-per-cent drop in sales last year.
Ford will seek to reduce European staff through voluntary measures as far as possible, the Dearborn, Mich.-based manufacturer said in a statement. Ford has already said it will cease production at a transmission plant in Bordeaux, France, and has started labour talks at the Saarlouis factory in Germany to end production of the C-MAX compact van. A review of the Ford Sollers joint venture in Russia is expected to conclude in the second quarter, it said.
Ford’s European business, which relies on models like the recently revamped Fiesta and Focus hatchbacks, reported a Us$245-million loss during the third quarter.