Ford shakes up its European operations

Admitting it had never really made money on its enormous European business, Ford today announced it was negotiating with its unions to shed surplus jobs and surplus production.

Ford Europe has 53,000 employees, but posted a €245 million loss in the third quarter of last year, which grew from a loss of more than €150 million in the same period a year earlier.

Europe has proven a tough nut to crack for American carmakers in the last decade, with GM turning to Korean-built, Chevrolet-branded small cars before focusing on the Opel brand and then finally abandoning the continent, selling Opel to Peugeot’s PSA parent.

Ford, too, admitted its European operations were not sustainable and hadn’t been for years.

“Ford of Europe has never really been sustainably profitable,” head of Ford Europe, Steve Armstrong, admitted, noting it had lost more than billion dollars over the last five years.

“As we look to the future of the business globally, (CEO) Jim Hackett and (CFO) Bob Shanks have been very clear: We can only afford to allocate capital to places where we can get a return on that invested capital.”

"We are taking decisive action to transform the Ford business in Europe," Armstrong said in a statement.

"Ford is accelerating key fitness actions and reducing structural costs. In parallel, the fundamental redesign will include changes to Ford’s vehicle portfolio, expanding offerings and volumes in its most profitable growth vehicle segments, while improving or exiting less profitable vehicle lines and markets."

Ford will axe its minivans, including the once-groundbreaking C-Max, and turn instead to electrification and compact SUVs, and it will rely more heavily on its Volkswagen partnership to help it renew its aging model range.

The two carmakers are scheduled to announce a deepening of their strategic partnership from June last year at the Detroit motor show on Tuesday, with sharing of commercial vehicles at their centre.

Ford and Volkswagen have been talking around the table for more than a year about pooling autonomous and electric-car resources.

From Volkswagen’s side, it’s keep to switch both the Atlas Tanoak and the next generation of the Amarok onto the Ranger architecture to allow it to be built in Ford’s US plants.

Ford wants to share Volkswagen’s MEB electric-car platform to avoid spending on its own EV car, especially in Europe.

The agreement would impact world markets, like Australia, by massively altering the small-car pipeline on everything from the Focus to the Polo.

Yet the hardest news in the car industry today was how hard Ford was taking the axe to its European operations and the seeming lack of faith the company’s US headquarters had in its ability to turn itself around.

Ford’s biggest European market, the UK, has been quantifiably hammered by Brexit fears and dieselmania, and at least one of its plants there is in danger of being shuttered.

"We are looking to make a step-change in the performance of the business," the head of Ford Europe, Steve Armstrong, said.

“There will be significant impact across the region. We will be looking at all options.

“We do not believe the Ford brand has positive long-term value in the European retail passenger vehicle market. A review of the manufacturing footprint is part of this process," he said.

Armstrong said he hoped any job losses could be part of voluntary processes, mostly because job cuts in Europe are much more difficult to do than in the US, and any Brexit deal would make the UK an obvious target.

"We will migrate out of the MPV segment. If Brexit went in the wrong direction we would have to have another look, to mitigate that," he said.

Ford announced a program for Europe called “Sprint to 6 Reset and Redesign” in December, which moves the brand towards its SUVs and vans and away from its traditional family friendly Galaxy and S-Max people movers.

It will close its Bordeaux plant in France and it’s already started talks to shutter its Saarlouis plant in Germany, where it builds the C-Max small minivan.

Ford also admitted it would run its current small diesel engines until their programmed ends, but it was very unlikely to develop any new diesel programs.

Instead it would favour BEV and plug-in hybrids, whether it closes its agreement with Volkswagen or not.

Ford said it will establish three separate groups in Europe for passenger cars, its vans business and imports such as the iconic Mustang. It said its commercial vehicles business in Europe is “solidly profitable.”

“We are continuing to invest in the business, especially in electrified cars,” Armstrong said. “We will still have a comprehensive lineup of cars in future with primarily SUVs and crossovers.”