Ford to cut 20% of European workforce in sweeping overhaul to combat falling sales
Restructuring will involve reducing footprint from 24 to 18 facilities by the end of 2020
Ford Motor will eliminate about 20% of its workforce across Europe in a sweeping overhaul to tackle the carmaker’s falling sales in the region and lift weak profitability.
The restructuring, which has been announced piecemeal, will involve reducing its manufacturing footprint in Europe to 18 facilities by the end of 2020 from 24 at the beginning of this year. Germany, the U.K. and Russia will be hardest hit by the cuts, which total about 12,000 regular staff as well as workers employed at joint ventures, Ford said Thursday.
“Separating employees and closing plants are the hardest decisions we make,” Stuart Rowley, Ford’s president of Europe, said in a statement. “We
are moving forward and focused on building a longterm sustainable future.”
Ford, struggling in the region’s crowded and mature market for years, has been particularly hard hit by falling car sales in the U.K. as a result of the uncertainty surrounding the country’s exit from the European Union. Underscoring the industry’s woes, the European automakers’ lobby group on Thursday lowered its forecast for the region, predicting that deliveries will likely fall 1% this year. That compares with a previous prediction of 1% growth. Ford’s European sales through May dropped 8.3%, according to data from the ACEA industry group.
Ford’s German- traded shares rose 1.7.%. The American company’s stock is down 13% over the past 12 months.
Ford announced in January a major revamp for Europe, but at the time didn’t specify the full extent of the job cuts. As part of the changes, six plants will be closed or sold by the end of next year, including the Bridgend engine plant in South Wales, a transmission plant in France and an assembly site in Russia.
Ford said that European operations are “on track” for significant improvement this year. Over the long term, the company is pushing to lift the division’s profit margin to 6% from 0.7% in the first quarter. Chief Executive Officer Jim Hackett last year kicked off a company-wide $11 billion restructuring and abandoned a goal to reach an 8 percent profit margin for the group by 2020.
“Even with these measures, it’s very hard to see Ford returning anywhere close to 6%-8% margins in Europe,” said Arndt Ellinghorst, a London-based analyst Evercore ISI.
The company’s woes aren’t limited to Europe. At its annual shareholder meeting in May, investors voiced their grievances over falling market share, the speed at which the company is cutting costs and the long way the stock still has to go to recoup steep losses over the last few years.
The challenges are forcing automakers to consider partnerships that would have once been unthinkable. Volkswagen may approve expanding an alliance with Ford when it meets in two weeks, according to people familiar with the matter.