Ford to cut jobs, idle plants, change lineup in Europe
Ford Motor Co. plans to revive its unprofitable European business by cutting salaried and hourly workers, ending production at plants in France and Germany, eliminating less-profitable vehicles like the C-Max from the lineup there, and possibly exiting a Russian joint venture.
The developing plans are part of CEO Jim Hackett's ongoing global restructuring of the Dearborn-based automaker — expected to also affect Ford salaried employees in North America. Hackett and his executives plan to spend $11 billion to fix struggling sections of the company abroad and cut costs in the U.S.
Europe has been a tough market for foreign brands in recent years. Lagging profits and the need for yet more investment to remain competitive prompted General Motors Co. CEO Mary Barra to sell off the company's European business in 2017. Ford has lost hundreds of millions in Europe in recent years. Through the third quarter of 2018, Ford had lost $119 million there.
"We have a good core to our business, but we need to get to sustainability," Steven Armstrong, group vice president and president, Europe, Middle East and Africa, said Thursday. "We need to reset the business today and redesign the business for the future."
Jim Farley, Ford president of global markets, said Wednesday that restructuring plans for Europe and South America will differ from whatever Ford decides to do in North America.
"The situation of South American or Europe is quite different," he said. "Those businesses, we see a really healthy business within them. So restructuring will be a piece of that. Over the next months and weeks, you’re going to hear more."
Ford employs roughly 54,000 people throughout its European operations. News of Ford's pending job cuts comes the same day British media are reporting Jaguar Land Rover could announce up to 5,000 job cuts amid uncertainty about "Brexit," the United Kingdom's looming departure from the European Union.
Brexit has also hit Ford's wallet in the last year. Armstrong said the actions announced Thursday in Europe were not a direct result of Brexit, but the automaker would have to re-evaluate what it announced Thursday should the effects of Brexit in March be harsher than expected.
Part of the plans for Europe mimic that which Ford announced in April for North America: getting the product lineup better in line with what customers want. In the U.S., Ford is cutting all sedans from the lineup in favor of more SUVs and crossovers. The automaker also plans to reduce complexity of existing products and pump money into already-profitable vehicle lines.
"We will either improve or we will exit unprofitable vehicle lines," Armstrong said.
SUVs are also growing in popularity in Europe. Ford's European lineup lags the competition there. The automaker has begun discussions with its Works Council to end production of the C-Max and Grand C-Max at its Saarlouis Body and Assembly Plant in Germany to pull back from a shrinking compact multi-purpose vehicle market.
Ford plans to introduce electrified options on all new vehicles going forward, starting with the all-new Ford Focus that just launched. The automaker also will grow its SUV lineup in Europe.
Ford officials said they'll double-down on commercial vehicles and "leverage relationships" like a potential partnership with Volkswagen AG to support commercial vehicle growth. Ford and Volkswagen have since June been in discussions for a sweeping global partnership on several areas of the auto industry, including commercial vehicles, electrification and autonomous vehicles.
The automakers could make an announcement about the partnership talks next week at the Detroit auto show.
Ford considered exiting its European business altogether, Armstrong said, but decided the highly profitable commercial vehicle business — led by the Transit van — is too valuable to abandon. Ford would benefit from increased production scale in Europe with a Volkswagen partnership, which could also be used to broaden its European product range.
"The reality for us is we have an extremely strong commercial vehicles business in Europe," he said. "We think that's something we can further grow. We decided the best option for us is to stay in Europe as long as we can reset the business."
Ford had previously announced plans to close its Ford Aquitaine Industries plant in Bordeaux, France, which builds transmissions. That plant will close in August. The automaker is in discussions with European labor unions regarding its Saarlouis plant in Germany.
Bloomberg News reported that thousands of jobs cuts are expected. Armstrong declined to give a headcount reduction estimate, expressing the hope that a majority of the cuts will come through voluntary measures.
Ford plans to consolidate its UK headquarters and Ford Credit Europe headquarters at the Ford Dunton Technical Center.
The automaker did not specify its plans for Ford Sollers, a joint venture in Russia, but said officials are "undertaking a strategic review" of the joint venture, and expects a decision on its future in the second quarter of the year.
Ford is targeting a 6 percent earnings margin over the long term in Europe. The automaker reported a negative 3.3 percent margin there in the third quarter of 2018. In the first quarter of the year, when the automaker made $119 million in Europe, it reported a 1.3 percent margin.
Armstrong said 2019's financials will "be a significant improvement over 2018." The automaker expects to have lost money in Europe in 2018.
Ford will report fourth-quarter earnings on Jan. 23 in Dearborn. Officials expect to detail plans for the global restructuring, including whatever job cuts to be made in North America, by the second quarter of 2019.Armstrong said Thursday the same goes for Ford's plans in Europe.