Ford has confirmed it will close its Southampton Transit plant in southern England and also axe stamping and tooling operations at its Dagenham complex, east of London.

It will, however, start making a new, low-CO2, two-litre diesel ‘Panther’ engine at its Dagenham diesel unit from 2016.

Today’s announcement takes direct job losses across the Ford Europe operations to 6,200, including the 4,300 announced in Genk, Belgium on Wedneday.

About 1,400 positions are being axed in the UK.

The automaker also announced more details of what it billed as its “plan to achieve profitable growth in its European operations through an unprecedented focus on new products, a strong brand and increased cost efficiencies”.

More efficient manufacturing footprint

The planned closure of three European facilities – Genk, as announced yesterday, Southampton and Dagenham tooling/stamping) – and relocating production of key products (consolidation of all European Transit output in Turkey) will, the automaker said, give it “a more efficient manufacturing footprint, significantly improved plant utilisation and work force reductions.

“The planned actions will reduce installed vehicle assembly capacity, excluding Russia, by 18% or 355,000 units. The related gross annual savings total US$450m to $500m,” Ford said in a statement.

The Transit assembly plant in Southampton and stamping and tooling operations in Dagenham will close in 2013 followed, as already announced, by Genk, pending negotiations with unions. The three plants currently employ around 5,700 hourly and salaried workers.

“Ford’s goal is to achieve employee reductions in the UK through voluntary means, enhanced employee separation programmes and redeployment to other Ford locations. Actions in Genk are dependent on the outcome of the ongoing employee consultation process,” the statement said.

Along with the further loss of another 500 salaried and contract (temporary) workers, also announced earlier, this European restructuring will result in the loss of at least 6,200 jobs by the end of 2014. Thousands more are likely to go at suppliers and support industries with one European estimate suggesting the Genk-related cuts alone could total 9,300 positions.

“Using the same One Ford plan that led to strong profitability in North America, we will address the crisis in Europe with a laser focus on new products, a stronger brand and increased cost efficiency,” said Ford president and CEO Alan Mulally said in the statement.

“We recognise the impact our actions will have on many employees and their families in Europe, and we will work together with all stakeholders during this necessary transformation of our business.”

New products and segments

Ford last month detailed plans to introduce 15 global vehicles in Europe within five years “as Europe increasingly benefits from the One Ford global product portfolio”.

It is expanding in the SUV segment, starting with a redesigned Kuga later this year, to be followed by the EcoSport within 18 months and, later, the North American Edge but has not yet said if these will be built in Europe – the EcoSport could be sourced from China, Brazil or India where production has been confirmed. 

Ford is also expanding its European commercial vehicle range over the next two years, including a redesigned and expanded Transit line (three body sizes plus new Tourneo ‘people carriers’) but production of these will now be consolidated in Turkey.

Even the American Mustang , is now coming to Europe, and with right hand drive as well, but, again, no source plant has been confirmed and likely volumes suggest it will be North American-made, like its LHD-only Chevrolet Camaro rival.

“The European market holds potential for profitable growth if we accelerate product development and move decisively to address our costs and overcapacity,” said Ford Europe chairman and CEO Stephen Odell. “Even in today’s environment, we are increasing the introduction of new products, leveraging our One Ford global strengths.”

Dealer network changes

As well as drastically adjusting its manufacturing ‘footprint’, Ford said it would strengthening dealer “network profitability and customer retail experience” and “strategically” reduce dealer stock levels.

“While Ford has maintained relatively lean stocks, recent improvements in vehicle logistics and IT systems have sped order-to-delivery, enabling this change. The new business practice will have a long-term positive effect on profits for both Ford and dealers, while customers will benefit from fresher vehicle inventories, quicker delivery and improved resale values.”

It also plans to “aggressively” expanding in European markets such as Russia and Turkey where it already has full manufacturing rather than just assembly plants.

“Ford’s announcements this week address manufacturing overcapacity stemming from the more than 20% drop in total industry vehicle demand across western Europe since 2007,” the statement said.

“New vehicle sales in the region have reached a nearly 20-year low this year and are expected to remain flat or fall further next year. The [rstructuring] plan [will] significantly improve plant utilisation in Europe…”

UK retains powertrain and R&D units

Ford insisted its UK operations – now almost solely the Dagenham ‘diesel centre’, research and development at Dunton, Essex and the Ford UK vehicle import, distribution and dealer management unit, would remain “a centre of excellence for powertrain development and production” and the new two-litre diesel engine for Dagenham, developed at Dunton, was part of that.

It added that “additional investment also is expected” at its Bridgend engine plant in South Wales “to support ongoing high volumes of petrol engine manufacture”. That plant will, though, lose some volume as a result of Ford’s former luxury car unit Jaguar Land Rover, now owned by Tata Motors , planning soon to make its own engines at its new Wolverhampton factory, currently under construction. 

“The challenges facing the European car industry have become more structural than cyclical in nature and require decisive action. The actions we are proposing come after extensive review and consideration, and we fully recognise and accept Ford’s social responsibilities in this necessary transformation of our business,” Odell added.

“Going forward, we will as always continue to review all areas of the business and take appropriate actions to strengthen our business.” 

Ford noted that, in recent months, it had taken other measures across its European in response to the downturn in Europe. These include reducing line speed, short-time working days and lay-off days. It has also reduced temporary employment in several plants. 

It will also stop participating in the FIA World Rally Championship as a factory team after the 2012 season.

Profitability predicted

The announcements came against the backdrop of what Ford called “the severe and persistent economic crisis in Europe” and its projected full year 2012 loss there of over $1.5bn.

This includes over $400m related to dealer stock reductions and about $100m of accelerated depreciation associated with planned manufacturing cuts.

“Compared with prior guidance, the higher loss is explained primarily by the strategic destocking actions being taken in the fourth quarter,” Ford said.

It is, however, projecting profitability in Europe by the middle of this decade thanks to higher industry volume and its own market share plus expected growth in emerging markets, along with a more profitable product mix and improved margins, as well as the more efficient manufacturing structure.

“A partial offset will be higher structural costs as the company reconfigures and grows its business,” the automaker added, targeting a long-term operating margin of 6-8% in Europe.

“While we are facing near-term challenges in Europe, we are fully committed to transforming our European business by moving decisively to match production to demand, improve revenue through new products and a stronger brand, improve our cost efficiencies and take advantage of opportunities to profitably grow our business,” Mulally added.

Earlier report

Genk closure update