Blog: Dave LeggettRationalising capacity in Europe

Dave Leggett | 25 January 2010

Last week saw General Motors in Europe move to close its Antwerp plant. Announcements of plant closure are never happy events, but this is an important step in improving GM's European manufacturing efficiency and raising its rate of capacity utilisation. We will know more about GM's European plans by the middle of next month when a business plan is finally supposed to emerge.

As Nick Reilly has said, they would rather get that Opel/Vauxhall business plan right than rush it. That's fair enough, but further delay will cause consternation for the workforce and GM's suppliers. There comes a point at which you have to put stakes in the ground and say to the world: this is the plan. And while we are on the subject of things appearing to be a little drawn out, it would be good to know what's happening to Saab. Maybe this week we will find out.

Also on the European production capacity front, last week saw some curious goings on at Renault. It was mooted that the next Clio (Clio 4 - due to enter production in 2013) might be made wholly in Turkey and not in France. Turkey is a low-cost place to make cars and, although it is not a member state of the EU, it enjoys a customs union with the EU and so is a particularly good place to source cars cheaply for sale in the EU area. A number of manufacturers, including Renault, have been quietly expanding operations there over the past decade.

This Clio 4-from-Turkey-only possibility did not go down too well with the French government. President Sarkozy duly hauled Messrs Ghosn and Pelata into a meeting. Afterwards, Ghosn declared that there would be dual sourcing on Clio 4 - some continuing to be made in France (at the Flins plant) and some in Turkey. What was less clear was the split between the two locations. The French production is presented as being dependent on capacity considerations concerning the Zoe electric vehicle - due in 2012 - at Flins. So, it's still a bit murky as far as Clio 4 in France goes. All Renault is signed up for is to make some in France. Numbers and the time period are unspecified.

But Sarkozy could claim he'd got something out of the meeting - an assurance that Clio will continue to be made in France. There are French regional elections in March, so that may explain some of the heightened political interest in French car companies right now. But, as Opel's failed sale last year also demonstrated, the political dimension to capacity rationalisation in Europe remains important and frequently runs counter to business logic.

Later this week (on Thursday) Ford releases its 2009 Q4 and full-year financial results. Will they be good results, Ford posting a decent profit? Quite possibly if Ford's Q4 sales figures are anything to go by. If Ford does post good financials it is likely that Alan Mulally will bring forward the guidance on when Ford will be full-year profitable from 2011 to 2010.

Ford has been through some pretty painful restructuring in North America to get its cost base there down. Sooner or later, European-based car companies will probably have to bite that bullet, however politically unpalatable, in order to have a shot at long-term success. Productivity improvements - helpful though they are - can only take you so far.


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