HITTING A RED LIGHT
Ford to close factories, cut 12,000 jobs as part of overhaul in Europe,
BERLIN— Ford Motor Co. detailed plans to close factories in Europe and cut 12,000 jobs, or more than 20% of the company’s workforce there, an effort to return to a profit in the region and focus on technologies that are reshaping the auto industry.
The moves are part of a revamp of Ford’s unprofitable European operations announced in January and a broader costcutting effort as the company pivots toward electric vehicles and autonomous driving. Ford said it would cut its European manufacturing footprint to 18 plants from 24 by the end of 2020.
As part of the overhaul in Europe, where auto makers are struggling with sluggish consumer demand after years of growth, the company aims to focus more on imported passenger cars and locally built, higher-margin commercial vehicles.
The move is the latest example of a big U.S. car maker retreating from Europe, which has high labor costs and is in the process of adopting some of the strictest emissions regimes in the world.
Ford and rival General Motors Co. for decades expanded their factory footprints and built sales forces across far-flung regions to build scale in a capitalintensive business. But in recent years each has trimmed its global presence, redirecting investment to their strengths, namely truck and sport-utility vehicles.
Ford shares rose nearly 3% in morning trading Thursday. Shares have rallied 33% this year amid an emerging view among some investors that Chief Executive Jim Hackett’s turnaround plan is beginning to gain traction.
Mr. Hackett has been under pressure from analysts who have questioned whether he is moving quickly enough to boost profitability. The company has outlined recent restructuring moves globally that have soothed investors. The auto maker last month said it is cutting 7,000 salaried positions and it is overhauling its moneylosing South America business.
Mr. Hackett still has a long road to recovery, though. Ford lost money in each of its overseas businesses last year, including a $1.5 billion loss in China, where the company had until recently been profitable. Mr. Hackett recently installed a new management team in China to lead the turnaround effort there.
The announcement in Europe adds key details to several statements that Ford has made since unveiling plans for a global restructuring last October. In January, Ford said the job cuts would hit a “significant number of the 50,000 we employ” in Europe, as it aimed to turn European losses into a 6% profit margin in the next few years. Ford has since unveiled plans for deep cuts in Germany, France, the U.K. and Russia.
“The cuts are very broadbased,” Stuart Rowley, president of Ford’s European business, told reporters on a conference call. “Ford will be a more targeted business in Europe, consistent with the company’s global redesign, generating higher returns through our focus on customer needs and a lean structure.”
The overhaul comes as the industry is under pressure from demands by European regulators to meet tougher greenhouse-gas emissions limits next year, waning demand as European car sales are expected to fall for the first time in six years, and uncertainty amid global trade tensions and a slowing economy.
The company said stepped-up imports would consist of “a niche portfolio of iconic passenger vehicles” that would include the Mustang, the Explorer and a new fully electric sportutility vehicle.
“Ford’s plan may be more comprehensive than appears at first blush,” Bank of America analyst John Murphy wrote in a research note last month, when he raised his rating on Ford shares to a buy.
GM exited Europe in 2017 by selling its business to French car maker PSA Group, citing the toughening regulatory environment and its own middling position in Europe. GM has said that it wants to compete only in markets where it can be a toptwo player, leaving it focused on North America, China and South America.
Ford is No. 6 by sales in Europe, with a 6.3% market share this year through May. The strategy outlined Thursday is focused more on boosting profitability than lifting sales volume. Its commercial-van business in Europe is 14% with “great profitability,” Ford strategy chief Jim Farley told analysts earlier this year.
The reduction in European manufacturing will result in the loss of around 5,000 jobs in Germany, and 3,000 in the U.K., more than 2,000 in Russia and nearly 1,000 through the closure of a plant in the Bordeaux region of France.
Ford has about 51,000 employees in Europe, and almost 200,000 world-wide as of last year.
Ford has struggled to generate consistent profits in Europe for years. In addition to the streamlining of its European business, Ford and Volkswagen AG recently said they would create an alliance to produce light commercial vehicles. Mr. Rowley said the talks, which are expected to conclude soon, were on track. He declined to elaborate.
In addition, Ford has been negotiating with local trade unions, which have more say over such restructuring measures than labor representatives in the U.S., about a number of plant closures.
Ford has also agreed to sell its Kechnec transmission plant in Slovakia to Magna International Inc., an automotive supplier.
Those talks have now been concluded and Mr. Rowley said the bulk of the job cuts would be completed by the end of next year.