Ford has announced plans to close two UK facilities – its van assembly plant in Southampton and the stamping and tooling operations in Dagenham – next year. The Southampton plant makes the current Transit model. With Southampton’s closure, Transit production will be consolidated at Ford Otosan in Kocaeli, Turkey. The closure of Southampton marks the end of Ford’s vehicle production operations in the UK.
The UK news follows yesterday’s announcement of the 2014 closure of its Genk plant in Belgium. The three plants employ a total of 5,800 hourly and salaried employees.
Ford’s sales in Europe have been suffering from the general industry decline, and concerns over possible closures have been rising. Total new vehicle sales in Western Europe have fallen to a near 20-year low and further declines are expected. Compared to 2007, total industry demand across Western Europe has contracted more than 20%.
“This is difficult and disappointing news for all the people and families affected by today’s announcement, but it is part of wider restructuring to ensure a stronger and more competitive European automotive industry … The decline in European vehicle markets and the uncertain future growth prospects has resulted in a number of vehicle manufacturers restructuring their operations. These are difficult times for the European automotive industry as manufacturers adapt to new market conditions and changing patterns of global demand,” commented Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT).
The closure of the two UK plants and the Belgian facility are part of a wide-ranging reorganisation geared at achieving profitable growth at its European operations. Overall, the European production restructuring will reduce the Ford’s installed vehicle capacity, excluding Russia, by 18% or 355,000 units, providing gross annual savings of US$450-US$500m.
“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,” explained Alan Mulally, Ford President and Chief Executive. “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.”
Under the revised production plan, Ford intends to stop output at the Genk facility by the end of 2014 and shift production of the Mondeo, S-Max and Galaxy to the plant in Valencia, Spain. To make room for them at the Spanish plant, the C-Max and Grand C-Max would move from Valencia to Ford’s Saarlouis plant in Germany in 2014.
Although it intends to close the Dagenham stamping operations and the Southampton plant, Ford has said the UK operations will remain a centre of excellence for powertrain development and production. This includes plans to add a new 2.0-litre diesel engine in Dagenham that will start appearing in future Ford models from 2016. The engine will be developed at Ford’s Technical Centre in Dunton, Essex. The OEM has also said it plans to invest in its Bridgend Engine Plant in South Wales.
“Ford has renewed its commitment to the company’s core R&D, design and engine manufacturing operations in the UK and these will continue to provide long-term and high-value employment to many thousands of people,” added Everitt.
In addition to these latest plant closures, Ford previously announced plans to cut its European salaried and agency headcount by 500 through voluntary departures. These cuts, along with the 4,300 jobs to go at Genk and the 1,400 at the two UK plants, will result in a total reduction of 6,200 jobs across its European operations.
“The European market holds potential for profitable growth if we accelerate product development and move decisively to address our costs and overcapacity,” said Stephen Odell, Chairman and Chief Executive of Ford of Europe. “Even in today’s environment, we are increasing the introduction of new products, leveraging our One Ford global strengths.”
Over the past few months Ford has been taking more moderate steps in an effort to address overcapacity, such as reducing line speed, introducing short-time working days and layoff days, and reducing temporary employment in several plants. It is also cutting back its marketing activities, and recently announced that it will stop participating in the FIA World Rally Championship as a factory team after the 2012 season.
“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 said. “Going forward, we will as always continue to review all areas of the business and take appropriate actions to strengthen our business.”
The OEM is now forecasting a more than US$1.5bn loss at its European operations this year, compared to a previous forecasted loss of US$1bn. By mid-decade, however, the OEM expects the region to return to profitability, thanks to higher industry volume and market share, growth in emerging markets, richer mix, improved contribution margin, and a more efficient manufacturing footprint. The company is targeting a long-term operating margin of 6-8% for Ford Europe.
On the bright side, Ford has said that excluding special items, third-quarter 2012 pre-tax profit and earnings per share for the company as a whole are better than second quarter 2012, despite the substantial loss in Europe. Ford will announce its full third quarter financial results on 30 October.
“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,” added Mulally.