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Ford Says European Cuts Will Restore Profits

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Genk, Belgium Plant (Ford photo)

Genk, Belgium Plant (Ford photo)

jeffgilbert Jeff Gilbert
Automotive reporter for WWJ Newsradio 950 and CBS Radio News....
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DEARBORN — (WWJ) Ford is cutting its European work force by 13 percent, and promising to restore profitability by mid-decade.  But, for the short term, they expect losses in Europe to mount to $1.5 billion this year.

“The same ‘One Ford’ plan that transformed our business in North America, and is guiding us toward the better future is being used to address the crisis in Europe,” said Ford CEO Alan Mulally.

Ford will close its Transit truck plant in Southampton, England, as well as a stamping plant in London.  This follows the closing of the Genk, Belgium plant announced earlier this week.   It will mean the elimination of 5700 manufacturing jobs.  Ford is also cutting 600 salaried jobs in Europe.

“The business environment in Europe is very difficult due to structural issues, associated with the sovereign debt crisis, that will likely continue for a considerable point of time, and take time to resolve,”  said Ford of Europe CEO Stephen O’Dell.

The European turnaround is about more than cuts.  Ford says it’s also updating its product portfolio, and introducing 15 new vehicles in the next five years.  That includes bringing the next generation of the Ford Mustang to Europe.

Ford is not the only major automaker to face big losses in Europe. General Motors is working on its own turnaround plan.  Chrysler’s parent firm Fiat is also looking at cuts.

The domestic carmakers all release third quarter earnings reports next week.  All of those reports are expected to be impacted by the difficult times in Europe.  Car sales in Europe have fallen twenty percent in the last five years, hitting levels not seen since the early 1990’s.

Strong sales here in North America are expected to offset Ford’s problems in Europe.  Ford says it’s pre-tax earnings for the third quarter will be better than the second quarter.

CEO Alan Mulally, however, says they are working from the assumption that the economic climate in Europe isn’t going to improve in the near future.

“We are really trying to reflect the reality of slower growth, especially in western Europe going forward.”

Long term, Mulally says, Ford expects stronger sales in the emerging markets of eastern Europe to more than offset the slower sales in the west.

“That’s why we need to move decisively now to right-size our capability to the real demand, but have that flexibility to grow as we come back.”

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