Ford of Europe said on Wednesday it was scrapping plans to produce the next generation Focus at its Genk plant in Belgium and reducing Mondeo production from three to two shifts, both actions cutting a total of 3,000 jobs, as it seeks to slash costs and return to profits, according to Reuters reports and a Ford statement.
“We need to significantly increase the pace of cost reduction in Europe if we want to return to profitability,” Ford Europe president Lewis Booth told Reuters at a news conference in Brussels, adding: “We must make sure we are not investing in excess capacity.”
According to Reuters, Booth said he expected Ford Europe to return to profitability in the fourth quarter of this year, but did not expect any significant pick-up in industry volumes next year.
“Overall industry volumes are down and frankly we don’t expect them to pick up in the foreseeable future,” Booth reportedly said, adding that capacity in Europe is increasing.
In a Ford statement, Booth said: “The automotive market in Europe has deteriorated dramatically since only a year ago. “With lower industry outlooks, a larger number of competitors, and escalating marketing costs, we must concentrate on maximising our product line-up while minimising our spending.”
The statement added that sales volumes in the European automotive market are down by over one million units since the original plans for Genk were drawn up, and the C/D segment in particular [in European size terms Focus is a ‘C’, Mondeo a ‘D’] has seen a sharp contraction in demand, from 13% of the market a year ago to 11.5% today.
The statement added: “Furthermore, flexible manufacturing technology has improved productivity at Ford plants by up to 15%, enabling more available capacity with less investment.”
In an internal Ford of Europe memo seen by just-auto, Booth said: “The actions we’re intending for Genk are particularly difficult, as they would impact many of our colleagues there. They are a necessary response to the sharp deterioration of the automotive business environment, and the ongoing need to align our manufacturing capacity with customer demand. None of us on the management team take this lightly, but I think it’s clear to everyone that such steps are necessary to help return our business to health and to ensure
that we save the funds necessary to keep investing in our product
According to Reuters, besides cancelling the Focus investment – which was announced last year and would have amounted to about €230-250 million euros for the Genk plant – Ford also plans to cut daily capacity of the Mondeo model line in Genk to 840 from about 1,100 now [by axing a shift] while two other European plants, including Saarlouis in Germany, would handle production of the new Focus [which shares its platform with the Volvo S40 and Mazda 3 and is due for launch in 2004].
Reuters said Ford Genk currently employs 8,300 workers but that number would drop to 4,700-4,800 by the end of 2004 as the new job cuts would come on top of earlier announced lay-offs.
The plant last year produced 362,200 cars, Reuters added.
Ford’s statement said Genk would continue to produce the current Mondeo and to serve as a stamping facility for Ford in Europe. Genk
also remained the preferred location for production of the next generation Mondeo, “subject to final review and approval of Mondeo investment plans”.
Ford said it would consult with the Genk works council and unions on its plans and will work with them to develop a social plan, including an appropriate financial package, to assist employees who may be leaving the company.
Genk employees would also be offered the opportunity to take up new jobs being created at Volvo’s Ghent plant in Belgium.
Ford expects affected employees will begin leaving by the end of the year.
“We are initiating these actions at Genk reluctantly, because of the impact it will have on employees,” Booth said in the statement, adding: “However, we need to adjust our business to new realities in the European industry. We are taking steps to accelerate cost reductions, while maintaining the new product momentum our business depends on.”
Ford said it was taking other steps to strengthen its business in Europe, including lowering salaried costs, acceleration of variable cost reductions through “Team Value Management”, increased engineering and manufacturing efficiencies and reductions in operating costs.
Prime minister Guy Verhofstadt, who faces an uphill struggle to create some 200,000 new jobs in Belgium in the next four years, will meet with European management of Ford later on Wednesday, Reuters noted.
Reuters said that Ford told its US employees on Tuesday it would cut some 3,000 salaried jobs by the end of the year and added that, last year, the company said it wanted to cut about 12,000 hourly jobs in North America as part of its turnaround plan aimed at generating $US7 billion in pre-tax profits by mid-decade.
Ford has about 79,000 salaried employees worldwide, with about 50,000 in North America, Reuters said, and, in addition to the North American cuts, its German arm is offering buyouts to 700 salaried workers and 1,000 hourly workers.