Ford Fiesta production to stay in Germany after cost-cutting labor deal

Newly built Fiestas wait to be transported from Ford's Cologne plant. Photo credit: Bloomberg

FRANKFURT (Bloomberg) -- Ford will make the next generation of the Fiesta small car in Cologne, Germany, targeting $400 million in savings on production costs from 2017 through 2021 because of greater worker flexibility.

An agreement with the works council will enable vehicle assembly at the site to be reduced to two shifts from three while engine production there will be increased to a three-shift schedule, Ford said in a statement. The pact covers all 24,000 Ford employees in Germany and includes a pledge not to cut jobs.

“This agreement and our decision to build the next-generation Ford Fiesta in Cologne marks another important step in Ford of Europe’s transformation and underscores our commitment to invest in competitive vehicle production in Germany,” Stephen Odell, Ford’s head of Europe, said in the statement today.

Ford laid out plans to return to profit in Europe in 2015, starting moves in October 2012 to shutter three factories in the region by the end of this year to stem losses. The European operations are “on track” for the turnaround, Ford CEO Alan Mulally said at a conference in Dusseldorf, Germany, on May 23. Losses this year are expected to narrow from the $1.6 billion posted last year.

Full shifts can be added on a daily basis or shifts can be cut or extended by 30 minutes according to demand, Ford said. Some operations currently provided by suppliers will be carried out by Ford employees to make the plant more cost efficient.

“We wanted to make the Fiesta profitable in Cologne,” Barb Samardzich, COO of Ford of Europe, said on a conference call with journalists. The “breathing factory” would make Cologne “globally competitive.”

The decision to stick to Cologne as the only assembly plant for the Fiesta is fending off employees’ concerns that production might move to Romania, where labor costs are about one-tenth the figures in Germany.

Ford’s Cologne plant opened in 1931. The company operates a second assembly plant in Germany in the town of Saarlouis, close to the French border.

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