Ford’s global cost-cutting drive hits Europe
Carmaker axing thousands of jobs, may close entire plants
Ford Motor Co. will cut thousands of jobs, weed out slow-selling models and potentially close factories in Europe, as the carmaker’s global costcutting 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.”
Chief executive officer Jim Hackett last year kicked off a company-wide $11 billion (U.S.) restructuring, as both Europe and Asia swung to losses and costs to invest in electric and self-driving vehicles begin to mount.
As with many other carmakers, Ford warned it wouldn’t meet its targets for 2018, and Hackett abandoned a goal to reach an 8 per cent profit margin by
2020. 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. Tata Motors Ltd.’s Jaguar Land Rover, formerly part of Ford, plans to cut 4,500 jobs in response to a sales slowdown.
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 op- erations 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 nodeal 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 belt-tightening. 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. The review also includes “rescaling the footprint of the business” with Ford reviewing the efficiency of its plants, Armstrong said.
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 CMAX 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 $245 million loss during the third quarter, widening from $192 million a year earlier. Similar to America, Ford will swing to a lineup of crossovers and SUVs, and drop several derivatives to streamline its offering, Armstrong said.
Over the long term, Ford is targeting earnings before interest and taxes of 6 per cent of sales in Europe. This year, performance will already be “significantly better” than 2018, Armstrong said.
Ford, whose business in Europe includes a “solidly profitable” commercial-vehicle 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,” Armstrong said. “We will still have a comprehensive lineup of cars in future with primarily SUVs and crossovers.”