With Britain’s troubled car industry facing severe cutbacks and job losses, the Prime Minister, Mr Tony Blair, and other government officials have held talks with Ford as it contemplates closing its major Dagenham plant in the South East.

Government officials said on Monday that Mr Blair recently met Ford’s chief executive, Mr Jacques Nasser, and that he and other officials were in contact with Ford over an internal review of its European operations, expected to be concluded in mid-May.

Mr James Vella, a Ford spokesman, said: “The review is continuing, and no decision has been made” about closing entirely the plant at Dagenham, which employs some 4,500 workers producing the Ford Fiesta compact. Ford announced in February that one shift would be discontinued, eliminating 1,500 jobs, in the northern summer. But auto industry executives have been saying for over a month that Dagenham is likely to be closed when the review is finished.

The prospect of another car industry cutback carries huge political freight after the government was apparently surprised by the decision of Germany’s BMW last month to sell its loss-making British subsidiary Rover Group.

BMW agreed to sell Rover’s profitable Land Rover sport utility vehicle division to Ford. It provoked an uproar, along with a separate move to sell Rover’s sprawling Longbridge car plant near Birmingham to Alchemy Partners, a British venture-capital firm that wants to produce only limited numbers of re-branded MG niche models and cut thousands of jobs.

Earlier this month, a consortium led by Mr John Towers, a former Rover chief executive, approached BMW with a $US1.3 billion ($2.2 billion) counter-bid intended to maintain mass car production with fewer job losses among Longbridge’s 9,000 workers.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

The British government, which said it had no prior knowledge of BMW’s plans to sell Rover, supported the counter-bid. But in a further setback for the government, executives close to the negotiations said that the Towers-led consortium was scrambling to meet a BMW deadline to guarantee financing.

Mr Helmut Panke, BMW’s chief financial officer, said last week that Rover was losing about $US3 million a day. The government’s discomfort over the Rover sale has deepened with the debate over the possible closing of the Dagenham plant, one of three major Ford plants in Britain. The opposition Conservatives have already criticised the government for failing to secure jobs or keep track of developments in the auto industry.

A spokeswoman for Mr Blair denied that his meeting with Mr Nasser had been inspired specifically by the prospect of Dagenham’s closing. But she acknowledged that both the Prime Minister and the Department of Trade Industry were “in dialogue” with Ford over its review of European operations.

British newspapers reported that Mr Blair had also telephoned Mr Nick Scheele, the chairman of Ford’s European division, who last week met labour union officials representing Ford’s British work force. The unions have threatened to call strikes at other Ford plants in Britain if Dagenham is closed.

Ford has made steady inroads into the British auto industry in recent years, buying such prestige marques as Jaguar and Aston Martin before it acquired the Land Rover division from BMW.

Indeed, Ford ranks as the top carmaker in Britain, with 12 per cent of the market, but its sales fell 3.7 per cent last year to just under 390,000 cars.

Across Europe, moreover, it has been losing market share steadily. Subcompact rivals like the Volkswagen Polo and Peugeot 206 have outshone the Fiesta, while Ford also failed to anticipate the shift of the region’s market toward more diesel engines and toward very small minivans like the Renault Scenic.

That has left it with surplus production capacity. A study by PricewaterhouseCoopers said Ford’s European assembly plants run at 72 per cent of capacity, compared with 83 per cent for General Motors. In Europe, Ford operates nine major assembly plants including modernised sites at Cologne, Germany, and at Valencia, Spain. But the Dagenham plant has had longstanding problems.