Fiesta production in Cologne. The automaker could use another plant closure in Europe, analysts reckon

Fiesta production in Cologne. The automaker could use another plant closure in Europe, analysts reckon

With overseas losses reducing total profit, analysts say Ford is under pressure to close at least one factory in Europe, where it may have more excess capacity than General Motors.

GM and PSA Peugeot Citroen have already announced plant closures in Europe and, according to industry watchers, Ford’s assembly plants in Southampton, England, and Genk, Belgium, could be vulnerable.

Ford is using just 63% of its factory capacity in Europe, where pretax losses this year may exceed US$1.1bn, double what the automaker projected.

Analysts at Morgan Stanley told the Bloomberg news service that this would make Ford’s capacity utilisation in Europe even lower than GM’s, and lower than any carmaker except Fiat.

Producing to real demand and dropping big incentives has been central to Ford’s comeback under chief executive officer Alan Mulally. The company has said it is developing a plan to match capacity to demand in Europe where it last closed a plant a decade ago and has been profitable for six of the last eight years.

While GM has lost US$16.4bn in Europe since 1999, Ford has performed better, earning US$1.73bn since 2007.

As well as facing stiff competition from European carmakers, and the fast-growing South Koreans, Ford and GM have also been battling a stubborn sovereign debt crisis and collapsing consumer confidence has sent car sales skidding for nine consecutive months in Europe, where the market has fallen to its lowest level in 17 years, according to the manufacturers’ association ACEA.

Ford said its sales in Europe fell 16% in June as the total market declined 1.7%. In the first half of this year, Ford’s European sales fell 10% against an industry-wide fall of 6.3%.

Any factory closure would face fierce opposition from unions and governments. Ford has cut capacity considerably in the past decade, shutting its Fiesta plant at Dagenham in the UK and selling its Jaguar, Land Rover and Aston Martin factories, also in the UK, as well as its Volvo operations in Sweden.

Its commercial vehicle factory in Southampton, which produces chassis cabs for the Transit, built fewer than 30,000 vehicles last year, using less than one-third of its capacity, according to IHS Automotive. That plant, with 550 workers, could be under threat, say analysts.

Genk in Belgium could also be vulnerable. The factory built 178,000 vehicles last year, about 68% of its capacity, according to Ford. It assembles the Mondeo, S-Max wagon and Galaxy.

However, Ford has said it will build the new version of the Mondeo in Genk next year and it has a labour contract to build mid-sized models there that runs to the end of 2014.