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Ford remains ambitious despite job cuts

Ford remains ambitious despite job cuts

By Bradford Wernle
Automotive News Europe / October 06, 2003


Ford of Europe says its European ambitions remain intact despite a move last week to cut an additional 150,000 units of capacity.

Ford's decision to cancel tooling for the next-generation Focus at its factory in Genk, Belgium, and lay off 3,000 workers will reduce its excess European capacity to a bare minimum. The company is now operating at about 90 percent of capacity.

The decision also leaves the fate of the Genk plant hanging on the next-generation Mondeo. The current Mondeo has been a disappointment as premium manufacturers have grabbed sales from mass-market brands like Ford in the upper medium segment. The cuts would reduce capacity at Genk to 300,000 units on two shifts from 450,000 units on three shifts.

Plans for the Mondeo, due in 2006, Galaxy and a hybrid vehicle on the same platform have not received final approval, but Ford insiders expect them to go ahead.

The automaker announced in February 2002 a E900 million investment plan for Genk. Pulling Focus out would save E230 million, but the rest of the investment still has to be approved.

Lewis Booth, new Ford of Europe president and COO, said poor market conditions contributed to the decision to cancel tooling to build the Focus at Genk.

"The automotive market has deteriorated dramatically since a year ago," he said. But Ford could still meet its future needs because flexible manufacturing has improved efficiency of existing plants 15 percent, he said. Booth doesn't see a significant recovery for at least a year.

With the withdrawal of the Focus from Genk, Ford has now cut nearly half a million units from its western European passenger car capacity since discontinuing production of the Ford Escort at Halewood, England, in July 2000 and Dagenham, England, in early 2002.

Saarlouis, Germany, remains the primary Focus production site and will be for the next-generation car, due in 2005. The C-Max compact minivan is also made there. Valencia also makes the Focus. With cuts at Genk, Saarlouis will likely run three shifts indefinitely.

Capacity question

The question is whether Ford will have the capacity to meet demand when the market picks up.

"I think there's a bit of a conflict between long-term market potential and the ability of Ford to make the products when all European markets recover," said Nigel Griffiths, an automotive analyst for Global Insight Automotive in London.

"Because of their big loss in the second quarter, they're trying to change their short-term cost structure. There may be a risk they're cutting back capacity too much in the long term."

But Griffiths said Ford could actually benefit if it gets the capacity equation right. Once the market recovers, Ford may not need to participate in the kind of discounting that has hurt manufacturer profits in Europe, he said.

Booth said Ford plans no further announcements of capacity reduction. The company hopes to realize its primary savings from its "Team Value Management" cost-cutting program, intended to address cost via its component base.

7,000 jobs in a month

The job cuts at Genk, which won't be finalized until after consultation with unions and the Belgian government, would bring to 7,000 the number of jobs Ford has cut in the last month.

The job losses raise morale issues for the remaining workers, who will be asked to take up the slack for their departed colleagues. Ford already is quite lean in several departments. The latest personnel reductions will not improve the situation.

Suppliers are also affected. On Thursday, Ford met with its suppliers to discuss the impact of the plans on their future investments at the Genk supplier park and the surrounding area.

Ford officials declined to be specific on what the cuts would mean.
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