LONDON -- Ford Motor Co. said Thursday that it would cut about a fifth of its European workforce and shut down five plants as the company deals with weak demand for its cars.
The automaker, which has struggled to turn a profit in Europe, said that about 12,000 of its 65,000 workers across Europe would lose their jobs, with most being offered voluntary separation programs.
The job reductions were announced along with plans to build more electrical vehicles in the region, as part of "a new business model" to streamline the company's European operations.
Ford started to shrink its European presence in 2013, but said at the start of 2019 that it would cut thousands of jobs. Like many global automakers, it has been buffeted by changes in the industry that have made it increasingly difficult to justify maintaining production facilities in the region.
Ford is closing three plants in Russia, one in France and another in Britain. It also will sell a plant in Slovakia, leaving it with 18 facilities in the area by 2020. It also will consolidate two headquarters in Britain and move them to one location.
Employees at its assembly plants in Saarlouis, Germany, and Valencia, Spain, will also have shifts reduced.
"Separating employees and closing plants are the hardest decisions we make, and in recognition of the effect on families and communities, we are providing support to ease the impact," Stuart Rowley, president of Ford of Europe, said in a news release.
The job reductions were announced along with plans to introduce new vehicles, including ones with the option of running on electricity.
"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," Rowley said.
In recent months, companies including Nissan, Honda and Jaguar Land Rover have all announced plans to withdraw from parts of Europe, where tighter regulations over fossil fuels, sluggish sales and the United Kingdom's pending exit from the European Union have made markets harder for carmakers.
In Britain, car production has fallen for 12 consecutive months, an industry group said this week, with output falling 15.5% over that period. The Society of Motor Manufacturers and Traders blamed Brexit for the continued slump. "The ongoing political instability and uncertainty over our future overseas trade relationships, most notably with Europe, is not helping," Mike Hawes, the chief executive of the organization, said in a statement.
At the same time, traditional auto companies are facing more competition from technology companies and have turned their focus to China, the world's largest maker and seller of electric cars.
Since announcing in January that it would be cutting jobs and facilities, Ford has teamed up with Volkswagen in an alliance intended to spur the development of electric and self-driving cars, as well as to cut costs.
The company said Thursday that all its new models would have options for electrification and it would be building electric vehicles in Europe.
"Our future is rooted in electrification," Rowley said.
The company says it is creating three new business groups -- commercial vehicles, passenger vehicles and imports -- to "facilitate fast decision-making" that benefits the customer.
"Each has a dedicated management organization, including leaders responsible for marketing, manufacturing and product development," the Dearborn, Mich.-based automaker said in the news release.
"Ford intends to grow its leadership as the top-selling CV (commercial vehicle) brand in Europe, including leading the pickup segment, and to double its CV profitability in Europe in the next five years. This growth will be supported by its strategic alliance with Volkswagen, its Ford Otosan joint venture in Turkey and a restructured Ford Sollers joint venture in Russia."
The commercial vehicle group will be based in the U.K., and the passenger vehicle group in Cologne, Germany.
"The imports group will comprise a niche portfolio of iconic passenger vehicles including Mustang, Explorer and an all-new Mustang-inspired fully electric performance utility coming in late 2020," the company said. "Ford expects to more than triple passenger vehicle imports into Europe annually by 2024."
When reporters globally pressed for details on whether the Ford F-150 pickup that leads sales in North America could be part of the strategy moving ahead in Europe, Rowley said, "We'll look at every Ford product."
"An F-150 would be a very niche product in Europe, given its physical size," he said.
Pressed on financial projections, Rowley was cautious, noting that Ford lost $400 million in Europe in 2018. While the company is hoping for better, it can't promise a profit in 2019, he said.
The company plans to increase earnings before interest and taxes to 6%.
Jon Gabrielsen, a market economist who advises automakers and auto suppliers, voiced concern about the pace of Ford's global restructuring.
"In all my life I have never seen a Band-Aid pulled off so slowly in a restructuring. Someday, when someone goes in and studies the excruciatingly long period of angst and anxiety for Ford employees, as this process will have dragged on, this will be found to have been at least two years of zero forward progress, followed by many years of major recalls for mistakes made due to all the time people were distracted and distraught, and followed by all the people moved to jobs they had no experience in," Gabrielsen said.
Information for this article was contributed by Amie Tsang of The New York Times and by Phoebe Wall Howard of the Detroit Free Press.
Business on 06/28/2019