Ford Looks to Cut Losses in European Market

Ford Motor Company has announced that it will shutter three of its European factories in an attempt to return its operations in that market to profitability. The closings will cut Ford’s European capacity by 355,000 vehicles or about 18 percent.  Ford’s aggressive restructuring plan will result in the loss of 6,200 jobs and reduce annual operating costs to about $500 million annually.

The automaker has also revised its 2012 European operations forecast. The new forecast calls for losses in excess of $1.5 billion. Ford had previously forecast losses of at least $1 billion in the European market.

Ford plans to close two of its U.K. facilities in 2013. Closing its Southampton and Dagenham plants will result in the loss of 1,400 jobs. The following year the automaker plans to idle its Genk, Belgium assembly plant which will eliminate an additional 4,300 jobs.

In a statement, Ford Europe CEO Stephen Odell said, “The European market holds potential for profitable growth if we accelerate product development and move decisively to address our costs and overcapacity,”

Most analysts see automaker’s willingness to make tough choices as a positive sign for the company. Morgan Stanley analysts said the announcement shows Ford has the “vision and industrial courage” to make the hard decisions necessary to remain competitive. Ford shares closed up 2.1 percent today.

In comparison to Ford’s decisive move, UBS analyst Philippe Houchois said, “With GM Europe you always wonder what’s going on. It looks like they are still bogged down in deciding what to do.”

Ford plans to continue producing its new low emissions 2.0-liter diesel engine in the U.K. and to expand operations at its engine plants in Dagenham in Essex and Bridgend in Wales.

The company will move production of its Transit commercial van, which is currently carried out at the Southampton plant, to the Ford Otosan facilities in Kocaeli, Turkey.  Fewer than 30,000 Transits were built at the Southampton plant in 2011. The Ford Otosan facilities have capacity to produce up to 320,000 Transits annually.

Production of the S-Max and Galaxy minivans, and Mondeo mid-sized sedan, will be moved to Ford’s Valencia, Spain facilities. The automaker plans to launch an updated Mondeo in 2014.

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