Ford to shut European plant; GM outlines product-sharing plan
Ford chassis plant in Britain also closing, reports say
Photo credit: REUTERS
Ford Motor Co. said it will close a Belgian assembly plant and General Motors outlined a joint product-sharing plan with a French rival as the Detroit automakers battle mounting losses in Europe. Ford is also preparing to close a plant in Britain as early as next year, Bloomberg and other media outlets reported, citing people familiar with the plans.
Ford said Wednesday it plans to end production at its car factory in Genk, Belgium, by the end of 2014 and move production of such cars as the Mondeo to Valencia, Spain.
GM said it would co-develop four vehicle projects before 2017 as part of its money-saving alliance with France's PSA/Peugeot-Citroen.
The moves come as Ford and GM prepare to release third-quarter earnings reports next week that are expected to show the mounting toll of Europe's struggles amid North American recoveries.
Ford has forecast that its Europe losses will top $1 billion this year, as the region braces for its biggest annual drop in car sales in 19 years. GM has racked up nearly $17 billion in losses in the region since 1999.
A Ford factory in Southampton, England, that makes chassis cabs for the Transit van will close as early as next year, two people familiar with the situation told Bloomberg, asking not to be identified revealing internal plans.
The European sovereign-debt crisis is set to lead to the biggest annual drop in car sales in 19 years, forcing automakers to close plants and slash costs to stem losses.
Ford scheduled a conference call with journalists and analysts on Thursday to provide more details of its overall transformation plan for Europe.
Ford CEO Alan Mulally said last month that the European industry needs to "size to the real demand" to become profitable.
The Southampton factory built fewer than 30,000 Transits last year, while "about 200,000 is the industry standard for an efficient plant," said Brian Johnson, a Chicago-based analyst at Barclays with an overweight recommendation on Ford. The carmaker's other European sites have capacity to make 230,000 vehicles a year, so Southampton is "clearly subscale from that standpoint."
Stephen Odell, head of Ford's European operations, is scheduled to meet employee representatives from all its U.K. factories on Thursday at the automaker's research center in Dunton, England, though no topic has been specified, said Roger Maddison, a leader of the Unite union.
Ford held a meeting Wednesday with labor leaders at Genk before announcing plans for the Belgian site.
The Southampton plant employs more than 530, according to Ford's website.
"We will make any further announcements at the appropriate time once the relevant stakeholders have been informed," John Gardiner, a spokesman at Ford's European headquarters in Cologne, Germany, said in an e-mail. "Going forward, we will continue to assess the economic situation and all areas of our business and take appropriate action."
Ford has been making cars in Britain since 1911. The carmaker's last auto-factory shutdown in Europe was a plant in Dagenham, England, in 2002 that made the Fiesta compact, a move that cut 2,000 jobs. The closing at Southampton will eliminate Ford's final vehicle-making factory in the United Kingdom, the people familiar said.
As part of the Belgian plant closing, production of the next-generation Mondeo mid-sized car and S-Max and Galaxy minivans would move from Genk to Ford's factory in Valencia, Spain.
"The proposed restructuring of our European manufacturing operations is a fundamental part of our plan to strengthen Ford's business in Europe and to return to profitable growth," Odell said in a statement.
The move depends on a successful "consultation process with employee representatives," Ford said.
Ford would free up capacity at Valencia by moving production of the C-Max and Grand C-Max minivans to Saarlouis, Germany.
Ford's sales in the European Union have fallen by 12.6 percent in the first nine months in a total market down 7.6 percent, according to industry association ACEA. In July, Ford said action was needed to "decrease our production to match real demand."
Ford has said it used only 68 percent of Genk's manufacturing capacity last year, below the 80 percent threshold typically considered profitable. The plant was considered vulnerable by analysts because the models it produces are near the end of their life cycles.
Ford reported a second-quarter pretax loss of $404 million in Europe, compared with a profit of $176 million a year earlier. Shutting the Genk factory could save about $500 million, UBS research analyst Colin Langan estimated in a Sept. 17 report.
Genk has operated on a four-day week for much of 2012, unions say, with only 15 more production days planned this year and none in December. Workers began blocking the gates when reports of the possible closure emerged on Monday.
Unions had said last month they were more optimistic about Genk's future after Ford set a date to start production of the new Mondeo there in October next year.
Jointly developed vehicles was one of the two pillars of the GM-Peugeot alliance announced in February.
The projects outlined today will cover:
• A joint program for a compact multipurpose van for Opel/Vauxhall and a compact SUV/crossover for the Peugeot brand.
• A joint multipurpose program for the small car segment for Opel and the Citroen brand.
• An upgraded low CO2 small-car segment platform for Opel's and PSA's next generation of cars in Europe and other regions.
• A joint program for mid-size cars for Opel and the Peugeot and Citroen brands.
The automakers said they aim to launch the first vehicles on these common programs by the end of 2016.
"All four projects will be developed combining the best platform architectures and technologies from the alliance partners," GM and PSA said.
"Beyond this, PSA and GM are currently sounding out whether to extend the cooperation potentially to other fields," GM added in a statement.
The automakers will continue to develop a joint purchasing organization, the other pillar of the alliance.
Reuters and Bloomberg contributed to this report.