Ford's European Operations Face Difficult Road

10/22/96

Reuters has reported that Ford Motor Co. reported a $472 million loss in Europe this week, and faces the difficult task of having to cut costs and jump-start its product line, in order to sell cars in a sluggish European market amid tough competition. Earlier last week, Ford's Vice President of Finance David McCammon disclosed plans to cut costs in Europe, including product costs, material costs, and personnel and plant costs.

The changes include an an early retirement program which Ford expects to to eliminate more than 2,000 jobs in Europe. The new plan, to be announced within the next three months, follows Ford's actions in 1993 to eliminate about 13,000 jobs from its European operations.

Ford compared its $472 million European loss to last year's $320 million deficit, and ascribed it, in part, to the costs of new product launches. Additionally, Ford's production and parts suppliers are heavily concentrated in Germany, where costs are high and the company is more susceptible to fluctuations in currency exchange rates.

Ford plans to change its supplier base, but that is a long-term task, like cutting investment costs in new products. The first new cars that Ford develops under its more efficient "Ford 2000" structure are not expected to be on the market for at least two more years.

Analysts say that the new Ford Ka minicar--developed for $250 million using off-the-shelf components--is a good start, but it's expected to bring only very small profit margins because of its low price.

Paul Dever -- The Auto Channel