Major Restructuring for Ford in Europe
12 May 2000
COLOGNE, Germany - Ford is to undertake a major restructuring of its
European operations in a key move to drive the company back to profitability
and strong, sustainable growth. The plan for its future was unveiled today,
following an extensive business review of its entire European operations.
The multi-faceted plan results from a three-month review of all Ford's
product plans and timings, its capacity utilisation and deployment of vehicle
assembly, powertrain manufacturing, and other key activities, including
engineering. The key elements of the plan are:
* Five-year investment of $500 million in Dagenham Engine Plant to become
more technology based as the global centre for diesel engine
manufacture.
* A proposed 50:50 joint venture company to be formed with transmission
specialists Getrag to engineer and manufacture manual transmissions at
facilities in Bordeaux, Halewood and Cologne.
* Cessation of vehicle assembly and major body construction at Dagenham by
first quarter of 2002.
* Voluntary redundancy programme for around 1,900 employees at Dagenham
Body and Assembly, partially offset by about 500 incremental jobs
associated with the expansion of diesel engine production and
engineering elsewhere within the Dagenham Estate. Net job losses on the
Dagenham Estate will therefore be around 1,400.
* Confirmation of $15 million investment for Ford Design Centre in central
London.
* Ford to proceed with $100 million Dagenham investment plans, including
$50 million for regeneration of Dagenham Estate, $26 million in the
Press Shop and $10 million for the Wheel Plant.
* Creation of a further 360 new jobs with the transfer of Commercial
Vehicle Engineering from the U.S. to Britain.
* 240 diesel engine engineers to be relocated to Dagenham.
* $12 million Ford-funded Employee Support Programme initiative.
* Proposal for a Joint Advisory Board, including trade union, government
and local development agency representatives, to oversee development and
implementation of the Employee Support Programme.
* Opportunity for expansion of diesel engine production at Dagenham by 80-
100,000 units per year.
* Additional opportunity for Bridgend Engine Plant to be source of new
petrol engine.
* Possible joint venture for forging and die casting operations in
Cologne.
Ford of Europe Chairman, Nick Scheele, said: "This is one of the most
crucial and difficult decisions we have ever had to make in Europe, but we
needed to take quick and decisive action. Our European business situation was
totally unacceptable.
"Fundamental to the entire review process was Ford's outlook for vehicle
assembly capacity in relation to expected demand. In 1999 Ford of Europe had
the capacity to build 2.2 million vehicles, but sold only 1.65 million. The
company does not anticipate that situation altering dramatically in the near
future unless decisive action is taken.
"Our new European management team plans to transform Ford's business in
Europe with accelerated product programmes - nine significant new product
actions every year over the next five years - and a rigorous focus on cost and
asset utilisation in particular. The plan targets growth in sales volume,
market share and much improved financial performance, in the next three to
five years.
"By taking aggressive measures to increase our sales volume, to increase
the number of new product introductions, by regaining market share in our
major markets and by capitalising fully on opportunities in growth markets in
central and eastern Europe, we are going some way forward," said Mr.Scheele.
"Nevertheless, even on our most optimistic projections, we do not expect
to be selling in excess of two million vehicles a year over the short to
medium term. With the planned actions we will take to improve efficiency and
operating flexibility, also adding to our capacity, we have the equivalent of
one full plant's capacity more than we need to meet demand."
Ford of Europe President, David Thursfield, and his business review team,
concluded that to leave the situation unaddressed would not only threaten the
viability of all Ford's plants, but also maintain an unsatisfactory business
situation.
"Over-capacity is a problem throughout the European automotive industry
and we are not alone in having to take tough decisions, but action was
necessary," said Mr. Thursfield.
"I know that what we plan to implement will be more difficult and painful
for some than others, but the study team has examined every possibility, every
option, and its recommendations are, we believe, the best way forward.
"Through these actions Ford of Europe will emerge as a more vigorous,
competitive and dynamic company. We are aiming for on-going cost reductions
of over $1 billion and these actions will be the single largest contribution
to that goal."
Restructuring Under Way
The business review represents a culmination of Ford's restructuring of
its European operations, which has also included the sale of Azambuja plant in
Portugal and closure of the Plonsk plant in Poland; transferring Halewood
production over to Jaguar; selling Ford's share in the AutoEuropa facility in
Portugal to former project partner VW; the introduction of single-shift
working at Dagenham; a realignment of the workforce at Genk in Belgium to more
realistically meet demand in the C/D (Mondeo-size) car segment; and ending
production of the Scorpio at Cologne.
It is also announced today that Ford will discontinue production of the
Escort and Transit at its assembly plant in Obchuk, in the Minsk region of
Belarus, by July of this year.
In addition, to achieve a re-balancing of capacity utilisation in existing
engine production, Ford will now concentrate all Zetec-SE volume at Bridgend,
a new family of four cylinder petrol engines at Valencia and 4.0litre V6
OHC/SOHC volume at Cologne.
New Joint Venture Company For Transmissions
Ford has signed a letter of intent with German transmission specialists
Getrag to form a 50:50 joint venture company for the engineering and
manufacture of a range of manual transmissions. The new company will take
ownership of existing Ford manual transmission facilities at Bordeaux in
France, Cologne in Germany, and Halewood in Britain.
Subject to the successful completion of negotiations, the new joint
venture company is expected to begin operation in the fourth quarter of 2000.
It would continue to produce the IB5, MT75, MTX75 and VXT75 transmissions for
Ford. Further investment would be committed to develop and produce new
transmission products for Ford and other vehicle manufacturers, subject to any
Government grants being negotiated.
Mr. Thursfield said: "This is an outstanding business proposition for
Ford. Joining with a highly respected partner creates an opportunity to take
the Ford manual transmission business forward with fresh momentum, opening up
the prospect of innovative new products and future growth through sales to
other vehicle manufacturers."
Ford also intends to enter into negotiations with potential partners to
establish a joint venture for its forging and die casting operations in
Cologne.
New Role For Dagenham Estate
Following the recommendations of the review team, Ford's senior European
management has elected to give the Dagenham Estate a new strategic role, with
new investment totalling $500 million over the next five years in diesel
engine engineering and manufacturing and also in other key areas of
manufacturing technology, process and logistics. This is in addition to
$500 million already invested over the last five years. As part of the
transition of the estate it is also planned, with regret, to cease vehicle
assembly and major body construction there by the first quarter of 2002.
It is anticipated that today's announcement, including the cessation of
vehicle production and major body construction, will result in an overall loss
of some 1,400 jobs on the Dagenham Estate by the first quarter of 2002. A
voluntary requirement to reduce by some 1,900 employees will be offset by
increased diesel engine activities, resulting in a net reduction of 1,400.
This is in addition to the 1,350 job losses resulting from Ford's move to a
single-shift in the Body and Assembly Plant, announced in February. Ford
will, however, remain as London's largest manufacturing employer, with some
4,455 employees continuing to work at the Dagenham Estate.
"It is with sincere regret that we have had to take this decision," said
Mr.Scheele. "We have a responsibility to employees and to the community and
are making it an absolute priority to minimise job losses through redeployment
to other Ford facilities in Britain, where job opportunities may be available.
We will do everything possible to achieve these job losses on a voluntary
basis and are also launching a $12 million ground-breaking Employee Support
Programme, which will provide help in terms of retraining, priority for
re-hiring, self-employment start-ups, independent financial advice and
outplacement support.
"We also propose the formation of a Joint Advisory Board, including
representatives of the UK Government and trade unions, to oversee the
development and implementation of the Employee Support actions."
Ford Plans $3 Billion Investment in UK
Ford Motor Company will continue to invest significantly in
Britain and plans a total investment of $3 billion in its facilities over the
next five years.
In 1999 alone, over $600 million was invested by Ford in research and
engineering. Its Dunton-based Engineering Centre is Britain's largest
automotive research and engineering facility employing some 2,686 people and
will continue to play a major role in Ford's global vehicle programmes.
The Dagenham Press Shop is a major operation, running three shifts, which
will be modernised as a result of the review. Over the next two years,
investment of $26 million will further improve its competitiveness.
The Dagenham Wheel Plant, which produces steel wheels for a range of Ford
products, will receive a $10 million investment to re-tool and re-equip for
the production of high strength, light weight, steel wheels for upcoming
models.
Dagenham-based Group Tooling will also continue and will be expanded to
include development of tooling for the manufacture of doors, bonnets, bootlids
and other body parts, at all Ford's European facilities, with potential for
capacity expansion.
Existing plans for production of 700,000 petrol car engines and 55,000 V8
engines at Bridgend Engine plant, will continue. However, the plant has been
identified as a potential source for production of an additional new petrol
engine.
The company also intimated earlier this year that London would be the
location for a new design studio.
"I am pleased to be able to confirm today that we are continuing with our
plans to invest $15 million in the new Design Studio, which will open in
central London next year. We believe London is currently the most influential
city in the world for new design trends and our centre will perfectly place
our designers to explore other design mediums, opening their minds to a
different way of creating products for the consumer," said Mr.Scheele.
Global Source For Diesel Engines
Dagenham is Ford's sole global manufacturing source for diesel engines
and, with $500 million investment already approved over the next five years,
is set to produce three new engine families, with a resulting volume increase
of 22 per cent. Now, the company is set to expand and develop its diesel
capability even more, with another new programme, providing potential for a
further 80,000-100,000 extra units.
The new project involves amongst other things the addition of another new
family of diesel engines, the installation of additional manufacturing
capacity and also relocation of engineering resources from Dunton to Dagenham.
Some 240 engineers, currently based at Dunton, will move to Dagenham as part
of the new totally integrated Diesel Engineering and Manufacturing team.
"The Dagenham Engine Plant is recognised as having produced high levels of
performance coupled with the flexibility to take advantage of business
situations as they arise and it is this track record that has generated the
confidence to invest further in the estate," said Mr. Thursfield.
Ford also confirmed that it will proceed with plans to invest more than
$50 million for the regeneration of the Dagenham Estate, in close co-operation
with local government authorities, local development agencies, and involving
closer integration with the local community.
Existing plans include significant environmental upgrades of the estate,
construction of a modern single point of entry, construction of a new visitor
centre and new technical training centre, contribution of land for use as part
of a major technical education initiative and construction of a new flagship
dealership.
This now includes confirmation of an additional second phase, with further
physical upgrading, refurbishment of the now-unused main office block on the
historic river front landmark of the Dagenham Estate and further commitments
to education, with the establishment of an Engineering Faculty on the
Education Campus with major links to other Ford Partner Global Engineering
faculties.
Specific Roles For Assembly Facilities
Ford currently has five major assembly facilities producing passenger cars
for Ford in Europe, which the business review identified as being one too
many. All were subject to the same review process and to the possible
cessation of vehicle production.
Genk, in Belgium, is to continue as the lead plant for Mondeo-size
vehicles and will also continue to produce the Transit. The cost of
transferring Genk production to other plants was prohibitive, the review
demonstrated.
The other four existing plants all handle Ford requirements for B
(Fiesta-size) and C (Focus-size) class vehicles, for which current and
projected demand is such that these requirements could be handled by just
three plants. One of these will be nominated as a 'flex' plant, giving Ford
the flexibility to `swing' production between its B and C car platforms as
required.
Saarlouis, in Germany, is to continue as lead plant for C segment
vehicles, such as the Ford Focus and has the potential to become a B/C car
`flex' plant if required. Again, the investment and re-tooling implications
in moving production elsewhere would be prohibitive.
Valencia also has the flexibility for two-platform production, with a
proven capability for this over several years. Valencia also has a good track
record and is the lowest cost producer of the five major facilities. It
currently produces, on two different platforms, the Ford Focus and
Fiesta-based Ford Ka.
Of the two remaining plants and, based on the long-term relative
performance of each, it has been decided to continue with assembly of
B-segment vehicles in Cologne.
It is also confirmed that Southampton Plant will assemble the new Transit
range of vehicles later this year and has recently benefited from investment
in a new paintshop and other facility modernisation in preparation for this.
Ford will now progressively move all its Vehicle Operations plants in
Europe to flexible bodyshops, modular supply/assembly and with supplier parks,
as new model programmes are launched. All will also have the flexibility for
three-shift assembly as required.
Commercial Vehicle Engineering
A key part of the plan will be the transfer of Ford's Commercial Vehicle
Engineering activities from the US to Britain. In itself this will create
some 360 new jobs in UK based engineering functions and once more give them
responsibility for roles including light and medium commercial vehicle
projects for Europe.
The Plan For The Future
With its new business plan, Ford is sharply focused on profitability and
growth. The actions outlined are expected to be implemented in the period
between now and the first quarter of 2002.
"In developing our plan for the future, we have had to balance our current
needs and projections against inevitable cost implications and overall
viability. What we have announced is a plan which will ensure we create a
platform for sustainable business growth," added Mr. Scheele.