Currently reading: The car industry now: Could Ford follow GM out of Europe?
Restructuring plans were already in place before the Covid-19 pandemic hit, which could accelerate Ford's plans to concentrate on other markets
Autocar
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4 mins read
2 June 2020

It has been three years since General Motors finally washed its hands of Opel and Vauxhall. After 17 straight years of losses totalling $20bn (currently £16.5bn) from its European division, it sold the business to the PSA Group.

That PSA quickly made the twin brands profitable shows how brilliant an operator Carlos Tavares is. But in the hands of mere mortals, Opel-Vauxhall’s performance under GM shows how hard it has been for US manufacturers to make Europe a successful outpost for their empires. GM hasn’t been the only American giant to have success elude it in Europe. Ford has had its own high-profile problems here, losing money in 12 of the 20 years before 2018, which meant a decision one way or the other needed to be taken.

Last January, Ford boss Jim Hackett announced his global restructuring plan – and Europe remained part of it, putting an end, at least temporarily, to two years of whispers from analysts and investors about whether Ford would ‘do a GM’ in Europe.

Restructuring in Europe includes Ford making redundant some 12,000 of its 51,000 European staff, factory closures – including Bridgend – and an overhauled model range that will include more SUVs, a growth area Ford was slow to respond to.

But then the pandemic hit, and it has hit Ford hard. Its first-quarter global operating loss was £500m this year, and Ford predicts that it could be as much as £4bn in the second quarter. It’s trying to save cash where it can, including by delaying new model launches, pushing back its autonomous vehicle programme and cancelling a joint venture between its Lincoln premium brand and electric car start-up Rivian. Yet eyes have turned to Europe once more, considering whether it’s somewhere Ford really needs to play.

So it has been asked again: will Ford follow GM out of Europe? “It’s too early to conclude,” says Felipe Muñoz, Jato Dynamics’ global analyst. “However, the current outbreak is going to have consequences on the way the industry operates. We will likely see more collaboration, agreements, alliances or even mergers.”

On that point, Ford is perhaps ahead of the game. It announced in 2018 an alliance with the Volkswagen Group, with the two committing to develop commercial vehicles (CVs) together. And it’s CVs where Ford is at its strongest in Europe. It’s the leader in this high-margin market, and it’s said that while Ford doesn’t make money on many of its cars, it does on its CVs.

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“The case of Ford in Europe isn’t exactly as it was for GM,” says Muñoz. “Unlike the latter, the former has more solid operations in Europe and isn’t facing the tough times that GM had to face in the US some years ago [GM filed for Chapter 11 bankruptcy during the 2008 financial crisis, but Ford never did]. However, there are some similarities: their ranges of products are very similar, Ford is also exposed to Brexit and Ford is extremely dependent on Nafta markets [the US, Canada and Mexico], leaving fewer resources to its divisions in Asia and Europe.”

Like many businesses, this will be a question of balancing short-term pain with long-term gain. Ford has already taken many of the tough decisions it thinks it needs to do to survive and then thrive in Europe, and cars such as the new Puma show Ford of Europe’s ability to create great cars to drive and own that are also on-trend. And with its highly profitable CV business, Ford would be walking away from more than GM ever did.

Indeed, it remains more committed than ever. In a statement, Ford said: "We have redesigned our Ford business in Europe, improving in every area of our business, and building the basis for a sustainable and profitable future in the region. Our new operating model is centered around three business units - commercial vehicles, passenger vehicles and imports - and electrification across our portfolio will provide customer choice and deliver CO2 performance.”

Can Dagenham survive as Ford's last British manufacturing base?

The fact that Ford’s historic plant in Dagenham now produces only diesel engines is enough to set alarm bells ringing, given the rapidly dropping demand for oil-burners. It currently produces more than 650,000 powertrains per year for vehicles such as the Transit and Mondeo, though, and Ford says: “Production volumes at Dagenham for diesel engines remain high for the foreseeable future.”

Even so, the long-term future must be in doubt unless Ford decides to retool the plant for electrification or similar. Peter Wells, an industry expert at Cardiff University, says: “Ford is going to struggle to justify that plant in the future, other than the fact it’s already there. If it has to retool it for electric power, it’s not going to be an attractive option, partly because of [Ford’s] overall market position but also it would have to export all its powertrains to Europe. It would be better off building them in Europe.”

Wells added that questions over the Essex plant lead to concerns over Ford’s research and development centre in nearby Dunton: “If Dagenham were to close, it would be likely to have a knock-on effect on Ford’s broader presence in the UK.”

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Comments
26

2 June 2020
Except (in my opinion) the new Kuga, which looks bloody awful.
And if there's one thing you need to survive these days, it's a good looking SUV.

2 June 2020

And before anyone starts the Brexit nonsense debate, let's have a history lesson.

Dagenham used to employ 40,000 - it now employs 2000. And in almost a complete reverse image of the decision Renault may be about to take ( if rumours of production moving from Barcelona to Sunderland is true ) once upon a time Dagenham along with Spain built the Ford Fiesta yet Ford decided in early 2000's to close UK production and move everything to Spain. So I'll say it again,  Fat lot of use UK being in the EU did for those who lost their jobs at Dagenham!

Whatever Ford decide, it will have nothing to do with Brexit.

2 June 2020
scotty5 wrote:

And before anyone starts the Brexit nonsense debate, let's have a history lesson.

Dagenham used to employ 40,000 - it now employs 2000. And in almost a complete reverse image of the decision Renault may be about to take ( if rumours of production moving from Barcelona to Sunderland is true ) once upon a time Dagenham along with Spain built the Ford Fiesta yet Ford decided in early 2000's to close UK production and move everything to Spain. So I'll say it again,  Fat lot of use UK being in the EU did for those who lost their jobs at Dagenham!

Whatever Ford decide, it will have nothing to do with Brexit.

Maybe, but the decision won't be helped by it. Lots of companies have been looking at it and making decisions. In my industry, an international company who had their European base in the midlands has just moved it to Germany, with the loss of 40-50 jobs all over the UK. It might not seem that many, but it is just an example of how it is making an impact. Ford may "only" have 2000 compared to what the used to have, but if they can utilise employees and factories inside the EU to avoid duty to a large markey, you can be sure they will seriously look in to it. To say that Brexit has nothing to do with at Dagenham it is a very simplistic view. 

2 June 2020
superstevie wrote:

scotty5 wrote:

And before anyone starts the Brexit nonsense debate, let's have a history lesson.

Dagenham used to employ 40,000 - it now employs 2000. And in almost a complete reverse image of the decision Renault may be about to take ( if rumours of production moving from Barcelona to Sunderland is true ) once upon a time Dagenham along with Spain built the Ford Fiesta yet Ford decided in early 2000's to close UK production and move everything to Spain. So I'll say it again,  Fat lot of use UK being in the EU did for those who lost their jobs at Dagenham!

Whatever Ford decide, it will have nothing to do with Brexit.

To say that Brexit has nothing to do with at Dagenham it is a very simplistic view. 

Yes, but thats the problem with Brexiteers - their views are very, very simplistic, even though reality is not, so its no use in telling them, theyll only realise once the sh*t has hit the fan.

2 June 2020

LMFAO “only realise when the S**t hits the fans”. Where has your Corbyn lefties been for the last 3 months. This Coronavirus is estimated to be 10 times worst then the hardest of no deals yet you think brexit will be the problem. Ironically now you have riots in Italy for the way Germany turned their back on Italy and Spain in their hour of need lmfao.

Your idols in labour supports the Chinese who are currently on the verge of a world war with India not to mention the fights they picked with Hong Kong, Philippines and Taiwan but your still fretting about a hard brexit. When was the last time the EU opposed China actions? Yet the brexiteers have been calling for a crack down on China involvement in the uk, speaking out against China while offering the Hong Kong natives a place to live if China undermines their freedom of speech. Bloody racist brexiteers hey.

4 June 2020

Spot on. When the UK entered the European Community all vehicles sold in the UK were built, and designed, in the UK. During membership Ford of Europe moved from being headquartered in the UK, to Germany, with every vehicle imported from - Transit (Turkey), Fiesta (Germany), Focus (Germany), Puma (Romania), Kuga/ Mondeo/S Max/ Galaxy (Spain), Ka+ (India) Mustang (USA), Edge (Canada - discontinued), EcoSport (India & Romania) petrol engines (Germany, Romania & Mexico). Diesel engines for the Transit are destined to transfer to Turkey, with Ford stating publicly that Transit "local content" will increase.

Ford like to sell to the highly profitable UK market but dislike employing UK staff and shop floor workers - the strategy since 2000 being to (as quietly as possible) close down plants and employement while protecting (lucrative) sales. But the UK buying public, 40% of whom used to buy Ford, now <10% , and outsold by VW pre-Covid 19. Design resposnibility transferred from Dunton Reasearch & Engineering centre, sites sold, with the Dagenham estate a huge building site of houses and flats under construction, the Warley, once Ford of Europe head office, just sold and, like others, under conversion to flats, the former Transit plant in Southampton now fully built on. The death by a thousand cuts soon to be completed, greedy prices rises and stupid product planning.       

2 June 2020

Maybe they should sell it, throwing in the Mercury brand, to Geely or to Tata, which could use it to rehash the Rover brand. 

2 June 2020

Even in the US Ford has retreated from several market sectors such as smaller cars like the Fiesta & Focus,the problem to me is that the vehicles are too expensive to be mainstream and the Blue Oval is not seen to be in the premium sector. 

4 June 2020

Exactly - there would have been a meeting during which Ford of Britain were told by the US to put up their prices to, say, those of VW. The Ford name carries a cache in the US which it doesn't in Europe - nobody dared say that! 

2 June 2020

No.

Next question.  

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