Ford to lean on Transit van in Russian joint venture
Ford Motor Co. plans to lean on its highly-profitable Transit commercial van in Russia to boost business there as the automaker revamps its European business unit.
The announcement comes a day after Ford announced plans to close its Bridgend Engine Plant in the United Kingdom. The automaker in January said it would make several moves including job cuts to boost profits out of Europe.
The Ford Sollers joint venture has since been restructured, and the joint venture would get investment to "further production increase and localization of the Ford Transit line-up in Russia."
"The (Special Investment Contract) signing is an important step in the preparations to launch the new Ford Sollers joint venture business in Russia," Steven Armstrong, chairman of Ford of Europe, said in a statement. "Our commitment to develop the Ford Transit business, together with the continuing support of the Government of the Russian Federation, will help us to build a successful strategy of commercial vehicle leadership in Russia."
The Transit is one of the leading vehicles in the Russian commercial vehicle market, according to Vadim Shvetsov, general director of Sollers. It's also one of Ford's best-selling vehicles in the region.
The automaker announced in early 2018 that it would be focusing its efforts in Europe to bolster the already profitable commercial vehicle there. Similar to moves made in North America, the automaker is drawing its focus away from small cars and sedans, which aren't profitable, and are more difficult to engineer to meet European fuel economy regulations.
Armstrong said in January when Ford first announced the details of its sweeping European restructuring that the company had considered exiting the European market altogether, but the commercial vehicle business there is too valuable to abandon.
Ford would benefit from increased production scale in Europe with its partnership with Volkswagen AG, a tie-up which could also be used to broaden its European product range. Ford and Volkswagen plan to partner on vans and small trucks outside the United States.
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 the company's European Opel and Vauxhall business in 2017 to Groupe PSA SA of France. Ford has lost hundreds of millions in Europe in recent years, including $398 million there in 2018, despite being one of the best-selling brands in the United Kingdom.
Ford employs roughly 54,000 people throughout its European operations. Ford officials declined then to give an estimate of the expected headcount reduction there. The automaker said Thursday it would cut 5,000 jobs in Germany, and more than 500 salaried jobs in the U.K.
The decision to reform its Russian business rather than leave the market contrasts crosstown rival GM's decision in 2015 to leave the country altogether. That was followed roughly two years later by the automaker selling its money-losing Opel and Vauxhall businesses in Europe and exiting the region after 90 years there.
It's harder for Ford to make a move like that, company officials have said, because Ford only sells the Ford brand in Europe. It wouldn't be able to sell Blue Oval-branded assets as easily as GM sold its European brands. The company instead has decided to change the way it does business there.
Stuart Rowley, president of Ford of Europe, said Thursday that the decision to close Bridgend would be the final "significant element" of its European restructuring. Ford plans to have eliminated 7,000 salaried jobs globally by August.