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Ford to cut thousands of jobs in Europe

10 January 2019

On January 9, Ford said it will cut thousands of jobs, exit unprofitable markets and discontinue loss-making vehicle lines as part of an effort to achieve a 6% operating margin in Europe. Ford said it will seek to exit the multivan segment, stop manufacturing automatic transmissions in Bordeaux in August, review its operations in Russia, and combine the headquarters of Ford UK and Ford Credit to a site in Dunton, Essex.

“We are taking decisive action to transform the Ford business in Europe,” Steven Armstrong, group vice president, Europe, Middle East and Africa, said in a statement. Armstrong declined to quantify the scale of job cuts, pending negotiations with labor leaders, but said staff reductions would run into the “thousands”. Ford hopes that voluntary employee separations in Europe will achieve some of the labor cost reductions. Armstrong said the company is in negotiations with worker representatives about potential job cuts at its Saarlouis plant in Germany, where 6,190 staff assemble cars, as the car maker considers discontinuing production of its Ford C-Max model. “We will migrate out of the MPV segment,” Armstrong said. Ford will focus instead on developing more profitable “crossover” vehicles. It will restructure its European arm into three segments: commercial vehicles, passenger cars, and imported vehicles from the USA.

The company is unlikely to develop next-generation diesel engines for smaller vehicles as customers have been abandoning the segment more aggressively than anticipated. All new models sold in Europe will come with an electric or hybrid option to lower the fleet CO2 emissions ahead of 2020 EU targets.

Ford also warned that its two UK sites—at Bridgend and Dagenham—face “significantly more dramatic” cuts than already planned if the country leaves with EU without a trading deal.

Globally, Ford is targeting $14 billion of cuts outside of North America to revive its international businesses. The company is expected to make significant changes to its operations in Latin America and China. The company declined to say how much of the $14 billion would come from Europe. Analysts have predicted the company could shed up to 24,000 employees globally as part of the restructuring effort.

Ford Europe, employing 53,000 people across 15 plants, has struggled to turn a profit, reporting a 245 million euro ($282 million) loss before interest and taxes in the third quarter, equivalent to a negative 3.3% EBIT margin.

The action by Ford follows similar cost-cutting measures announced by GM in November 2018. However, the GM restructuring plan is focused on North America, as the company has a much larger production base in the United States, compared to Ford.

Source: The Globe and Mail | Financial Times | Reuters