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It was new products at Paris a month ago, but now Ford gives us the bad news. Andrew English looks at the issues behind Ford’s closure announcement.Several sorts of truth can explain Ford’s decision to entirely cease manufacturing vehicles in the UK with the closure of its Southampton Transit factory and the Dagenham stamping facility that supplies it.
Consequent UK manufacturing job losses will amount to 1,500 staff. In Belgium, there are an additional 4,300 job losses at Ford’s massive Genk factory, which is set to close, plus another 500 white-collar redundancies across Europe.
The first and foremost truth is that demand for vehicles in Western Europe has crashed by more than 20 per cent since its all-time high in 2007 and isn’t expected to climb any time soon. Ford sold 1.48 million vehicles in Western Europe in 2007, with a market share of 10.9 per cent. Last year it sold 1.21 million vehicles with a market share of just 8.2 per cent and its share has fallen to just 7.9 per cent for the first half of this year, with European losses expected to be about $1.5 billion (£930 million).
“A predicted loss of $1.5 billion in Europe suggests we need to do something about this quickly,” said one Ford senior manager speaking to Telegraph Motoring. And while other car makers wrangle with European over-capacity and burgeoning losses, it is characteristic of the Ford style under chief executive Alan Mulally that it is directly addressing the problems by reducing its car production to match demand. The closure of three European plants is predicted to reduce Ford’s installed capacity by 355,000 units or 18 per cent, yielding gross annual savings of between $450 and $500 million (£279 million to £310 million).
Ford’s Transit plant in Southampton, which was opened in 1972 and at its pomp employed 4,500 workers, has been down to single-shift working in the last few years with just 500 staff. It is also geographically constrained, unlike Ford’s principal commercial vehicle factory operated by Ford Otosan in Kocaeli, Turkey, where all Transit production will be consolidated.
And yet, and yet. It’s interesting that Germany, where, according to Frost and Sullivan, manufacturing costs per hour are in the region of €36 (£29) compared with €22 (£17.70) in the UK and Spain, has remained largely untouched by the retrenchment. Ford’s massive German Saarlouis plant is even getting extra production of the Ford C-Max and Grand C-Max displaced from Ford’s Valencia plant in Spain.
Stephen Odell, chief executive of Ford of Europe, claims that neither cost of production nor the cost of laying off workers (which is more difficult and expensive in Germany according to figures shown to us by the Unite trade union) was a major factor in the restructuring. “This is all about capacity utilisation,” he said. “Genk is operating at less than 50 per cent, Southampton at less than 40 per cent… We can’t continue to have these losses.”
Under the new plan, Valencia will get the production of the new Mondeo, Galaxy and S-Max from Genk and the subsequent shuffling will “top up production” of Valencia and Saarlouis “to make mega plants of both,” according to Odell. The move means that the already delayed launch of the new Mondeo will be put back to 2014, but Odell says he is “comfortable” that demand still exists for the current Mondeo and there are plans to revise the car’s drivelines to keep it competitive.
Mulally is fond of quoting Henry Ford at his grand press gatherings such as that which took place prior to last month’s Paris motor show . One of the salient points about the Ford founder, however, is that by paying his workers decent wages in the areas where he sold cars, he created a motoring middle class, able and willing to buy Ford vehicles. In “right sizing” Ford to suit recession-hit Europe and moving production to low cost/wage economies such as Turkey, isn’t Ford becoming part of the problem?
“We do see income growth as a generator of growth,” acknowledged Odell, “but we have to be competitive.” While his lieutenants acknowledged that the UK closures and redundancies were “unpalatable and difficult,” Odell claimed that Ford ceasing to make vehicles in Britain “is not a retrenchment. We are still committed to Britain.”
In evidence of his continuing commitment to the UK, Odell cited an investment programme for a replacement 2.0-litre turbodiesel engine (code named Panther) which will be designed at Ford’s technical centre in Dunton, Essex and built at the company’s Dagenham diesel engine facility, as well as a new petrol engine, which will be built at the company’s Bridgend plant in Wales, sustaining a third shift there.
With most car makers looking at closing some of their under-utilised car factories in Western Europe, Ford’s cutbacks will not be the last bad news for car-making jobs in the EU. According to the European Automobile Manufacturers’ Association (ACEA), European car making directly employs almost two million, with a further 10 million employed in supplier companies. It looks as though those figures will be falling over the next few months.
Perhaps the main hope for European car employment lies with high-skill jobs designing and engineering the vehicles of tomorrow rather than traditional “metal-bashing” car building trades of old. That’s the main message from Ford, but a winter of job losses and car-plant closures are hardly going to be good news for the European economy in the next few months.
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