U.S. Automaker Ford Consolidates Businesses in Europe, Closes Three Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--As the car sales in the European Union slumped 11% in September with the Euro zone crisis, the U.S. carmaker Ford Motor Company (NYSE:F) (Dearborn, Michigan) accelerated its efforts to consolidate its businesses in Europe. First, the company announced plans to close its plant in Genk, Belgium.

According to a company statement, the company expects the plant to close by the end of 2014. Currently, the factory in Genk is manufacturing the Mondeo and S-Max models, which will be produced in plants in Spain after the closing. Ford said it hoped to achieve the job losses through voluntary redundancies and redeployments. "We will address the crisis in Europe with a laser focus on new products, a stronger brand and increased cost efficiency," Ford CEO Alan Mulally said in a statement. The Genk factory employed 4,300 workers.

The company also plans to cut its work force by 1,400 in its plants in Southampton and Dagenham in the United Kingdom. The Southampton Transit van factory and the stamping plant at Dagenham, Essex, will shut next year. Also, the production of the new van model of Ford Transit will move to its plants in Kocaeli, Turkey.

Ford said the decision to close the plants was taken "against a backdrop of the severe and persistent economic crisis in Europe," which had seen demand for cars in Western Europe drop 20% since 2007 and car sales in the region hit a 20-year low. The company also estimates more than $1.5 billion in losses in its Ford Europe division.

"Ford will also have 'substantial' costs from cutting workers in 2013, and it will write down $100 million this year and $400 million in 2013 for the value of the factories it's closing," said Bob Shanks, chief financial officer of Ford in a conference call. "Also, there will be additional write-down for shutting the 48-year-old plant in Genk."

"This year will represent peak European losses for Ford. Europe has a problem of overcapacity in its automotive business," said Rod Levin, an automotive analyst at Deutsche Bank in New York. "If initial attempts at plant closures are successful, there is potential for incremental announcements over the next several quarters. The savings from the closure of Genk plant could be $500-600 million and would likely drive $1 billion in restructuring expense."

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