By William Boston and Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 28, 2019).
BERLIN -- Ford Motor Co. laid out plans to close factories in
Europe and cut 12,000 jobs, or more than 20% of its European
workforce, aiming to return to a profit in the region and focus on
technologies that are reshaping the auto industry.
The auto maker had broached the revamp of its European
operations in January as part of a broader cost-cutting effort,
with the company pivoting toward electric vehicles and autonomous
driving. Ford, which has struggled to maintain profitability in
Europe for years, said Thursday it would shrink its manufacturing
footprint in the region to 18 plants from 24 by the end of next
year.
The company aims to rely more on imported passenger cars and
locally built, higher-margin commercial vehicles for its sales in
Europe, where auto makers are now struggling with sluggish consumer
demand after years of growth.
Ford's pullback in the region, the latest retreat by a big U.S.
car maker, comes as European regulators are establishing some of
the strictest emissions regimes in the world -- which combined with
high labor costs figures to pressure auto makers' bottom line.
Ford and rival General Motors Co. for decades added factories
world-wide and built sales forces across far-flung regions to
achieve scale in a capital-intensive business. But in recent years
they have trimmed their sails, redirecting investment to their
strengths, primarily building pickup trucks and sport-utility
vehicles.
Ford's share price has risen by a third this year on the view of
some investors that the turnaround mapped out by Jim Hackett, who
was installed as Ford CEO in 2017, is beginning to gain
traction.
"Ford's plan may be more comprehensive than appears at first
blush," Bank of America analyst John Murphy wrote in a research
note last month, when he raised his rating on Ford shares to a
buy.
Ford shares rose 2.9% to $10.20 on Thursday.
Mr. Hackett still faces pressure to move more quickly to boost
profitability, though recent restructuring moves appeared to damp
criticism. The auto maker last month said it was cutting 7,000
salaried positions and overhauling its money-losing South America
business.
Ford has a long road to recovery. The company lost money in each
of its overseas businesses last year, including a $1.5 billion loss
in China, where it had been making money. Mr. Hackett recently
installed a new management team in China to attempt a turnaround in
the world's largest auto market.
Ford unveiled plans for a global restructuring in October and
has been fleshing them out since.
In January, Ford said job cuts in Europe would hit a
"significant number of the 50,000 we employ" in the region, as it
aimed to turn European losses into a 6% profit margin in the next
few years. Ford has since laid out plans for deep cuts in Germany,
France, the U.K. and Russia.
"The cuts are very broad-based," Stuart Rowley, president of
Ford's European business, told reporters on a conference call
Thursday. "Ford will be a more targeted business in Europe,
consistent with the company's global redesign, generating higher
returns through our focus on customer needs and a lean
structure."
Ford said stepped-up imports would consist of "a niche portfolio
of iconic passenger vehicles" that would include the Mustang, the
Explorer and a new fully electric sport-utility vehicle.
Ford's overhaul comes as auto makers in Europe face demands by
regulators to meet tougher greenhouse-gas emissions limits next
year, possibly the first annual sales decline in six years, and the
uncertainty of global trade tensions and a slowing economy.
GM exited Europe in 2017 by selling its business to French car
maker PSA Group, citing the toughening regulatory environment and
its own middling position in Europe. GM has said that it wants to
compete only in markets where it can be a top-two player, leaving
it focused on North America, China and South America.
Fiat Chrysler Automobiles NV, which is firmly rooted in Europe,
is looking to beef up in the region, most recently through a
proposed merger with Renault SA. Those plans fell apart earlier
this month.
Ford is No. 6 by sales in Europe, with a 6.3% market share this
year through May. The strategy outlined Thursday is focused more on
boosting profitability than lifting sales volume. Its
commercial-van market share in Europe is 14% with "great
profitability," Ford strategy chief Jim Farley told analysts
earlier this year.
Ford and Volkswagen AG recently said they would create an
alliance to produce light commercial vehicles. Mr. Rowley said the
talks, which are expected to conclude soon, were on track. He
declined to elaborate.
Ford has about 51,000 employees in Europe, and almost 200,000
world-wide as of last year. The reduction in European manufacturing
will result in the loss of around 5,000 jobs in Germany, 3,000 in
the U.K., more than 2,000 in Russia and nearly 1,000 in France
through the closure of a plant in the Bordeaux region.
Ford has been negotiating with local trade unions -- which have
more say over such restructuring measures than labor
representatives in the U.S. -- about a number of plant closures.
Those talks have now been concluded and Mr. Rowley said the bulk of
the job cuts would be completed by the end of next year.
Ford has also agreed to sell its Kechnec transmission plant in
Slovakia to automotive supplier Magna International Inc.
--Nathan Allen contributed to this article.
Write to William Boston at william.boston@wsj.com and Mike
Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
June 28, 2019 02:47 ET (06:47 GMT)
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