F Ford Motor Company

Revamp includes job cuts, plant closures; several low-profit models will be scrapped

By William Boston 

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 (January 11, 2019).

BERLIN -- Ford Motor Co. is launching an overhaul of its money-losing European business that is expected to include thousands of job cuts, plant closures and the cancellation of low-profit models amid a series of bad news for global car makers.

The move is part of a broad cost-cutting effort that Ford Chief Executive Jim Hackett has embarked on in an industry facing the challenges of electric vehicles and a push toward autonomous driving.

In October, Ford informed employees of a global reorganization that could affect salaried jobs, part of Mr. Hackett's push to improve profits and boost its sagging stock price.

Steven Armstrong, the company's president of Europe, Middle East and Africa, declined to provide details on the planned job cuts during a call with reporters Thursday. He said they would be made across the board throughout Europe and were still being negotiated with trade unions, as local labor laws often mandate.

However, he said the belt-tightening would "have a substantial impact," with details expected to be available by the end of June. "It will be a significant number within the 50,000 we employ," he added.

The restructuring is the latest sign that waning demand and weaker profits in Europe -- amid concerns around Brexit, trade tensions, the gradual death of diesel engines and an economic slowdown in China -- are forcing car manufacturers to aggressively prune their businesses after years of steady growth.

From January to November, the most recent data available, Ford sold 910,391 vehicles in the European Union, down 2.3% from the same period of 2017. That left the company with a 6.4% share of the European market.

In November, new-car sales in the EU fell 8% from a year earlier, following a 7.3% decline in October and a 23.5% plunge in September. During the first 11 months of 2018, 14.2 million new cars were sold in the EU, an increase of 0.8%.

In a separate announcement Thursday, Jaguar Land Rover, the British premium car maker owned by India's Tata Motors Inc., said it would cut 4,500 jobs world-wide. JLR has been struggling with weaker demand in China and a dramatic decline in diesel vehicle sales in Europe.

Ford rival General Motors Co. said in 2018 that it would close five plants in the U.S. and Canada, after selling its European business in 2017 to France's Peugeot SA, to boost profitability and focus investment on new technology.

Unlike GM, Ford said it would stick it out in Europe, at least for now.

"We decided the best option is to stay in Europe as long as we can reset the business and make it profitable," Ford's Mr. Armstrong said.

Ford, he said, has had trouble making money in Europe for decades. But a convergence of global trends -- including pressure to invest in new technology and consumer preferences shifting away from traditional sedans to sport-utility vehicles and light trucks -- coupled with a mandate from Ford headquarters to increase profits were driving the restructuring decision.

The move in Europe is among the first elements of a broad, multiyear revamping of Ford's global operations. Last summer, the Dearborn, Mich., company said it would take up to five years to execute an $11 billion restructuring, but has offered few details about what parts of the business might be scrapped or sold, leading to some frustration among analysts and investors.

In October, Mr. Hackett, the CEO, cited an "unexpected deterioration" in Europe as a key reason why Ford cut its goal of achieving an 8% global operating-profit margin by 2020. Ford's losses in Europe widened to $245 million in the third quarter.

The new plan aims to boost its operating-profit margin in Europe to about 6% in the midterm, still shy of Mr. Hackett's global target.

To get there, Ford plans to stop making models that aren't profitable. The first to go are the company's C-Max compact car and Grand C-Max family sedan. As a result, Ford will curtail a shift at its factory in Saarlouis, Germany, eliminating 1,600 jobs. The company has already stopped making those models in the U.S.

"The industry has spent years chasing unprofitable business," Mr. Armstrong said. "Portions of our business are profitable. We need to address the portion of our business which isn't profitable."

Ford will also shut down production at its Ford Aquitaine plant in Bordeaux, France, where it makes transmissions, clutches and other components.

In the U.K., where Ford's operations are suffering from the political uncertainty surrounding Britain's planned exit from the EU, Ford is merging some administrative offices and functions. For now, Mr. Armstrong said, no decision has been made on whether to close its engine and components plants in Dagenham and Bridgend. But, he said: "Nothing is off the table."

Mr. Armstrong said Ford still believes the U.K. will negotiate a smooth transition out of the EU, but added that the restructuring would likely be more severe if there is there is no agreement on the departure.

Corrections & Amplifications The most recent data on European new-car sales are for November. An earlier version of this article incorrectly said October figures were the latest available. (Jan. 10, 2019).

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

January 11, 2019 02:47 ET (07:47 GMT)

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