Ford begins European restructuring with management shakeup

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LONDON – Ford Motor Co. has taken the first step in the restructuring of its loss-making European company, which is expected to involve axle models, job losses and possible plant closures.

Ford has appointed executives in Germany and the United Kingdom to implement its plan, named "Sprint to 6 Reset and Redesign," the automaker said in a press release on Friday.

The name refers to Ford's aim to achieve an EBIT profit margin of 6 percent (profit before interest and taxes). The company did not give a timetable for the target.

Ford said that the former head of quality, Gunnar Herrmann, will lead the restructuring in Germany, while Graham Hoare will perform the same job in the UK. Hoare was previously responsible for the test and development activities of Ford worldwide.

Most of the announcements around the restructuring are expected between now and the beginning of 2020, a Ford spokesperson said.

More partnerships

Ford has said that the European plan will focus on its profitable crossovers, SUVs and commercial vehicles and on reducing non-profitable model lines. The company will also depend more on partnerships to keep costs low.

Ford and Volkswagen Group have said they are discussing an alliance for commercial vehicles. This can be expanded with possible cooperation in the field of autonomous driving and arrangements to make vehicles for each other, Bloomberg reported in October. Ford has not confirmed that.

Ford already has a long-standing partnership with PSA Group to share engines.

Ford lost $ 245 million in Europe in the third quarter, compared to a loss of $ 53 million in the same quarter last year. This was due to the weakness in Turkey and Russia and the launch related costs for the latest compact Focus car, the company said on October 23.

Morgan Stanley estimates that the bulk of Ford's $ 11 billion global restructuring plan will focus on Europe and the region will suffer the bulk of job losses expected by Ford's 25,000 jobs. It values ​​Ford's European operations at "negatives $ 7 billion," said Morgan Stanley analyst Adam Jonas in a note.

Ford called the Morgan Stanley job cut estimates "pure speculation." However, the automaker has said that the restructuring would happen "largely outside of North America."

Non-profitable vehicles

In July, Ford CFO Bob Shanks said that the majority of Ford's European vehicle range was not profitable. This consisted mainly of cars and vehicles with multiple activities [minivans] like C-Max, "he said Ford's Transit, Kuga cross-over and Ranger pickup and" selected imports "are selling profitably in Europe, Shanks said, without mentioning the imported vehicles, probably including the Edge midsize crossover and the Mustang sports car.

Jim Farley, Ford & # 39; s head of global markets, said that commercial vans earn 13 percent profit margins for the automaker in Europe. He acknowledged that Ford has slowly expanded into the crossover / SUV segment in Europe.

Ford has said it expects an annual loss in Europe in 2018 after gaining $ 234 million in the region last year, because it is in a headwind, such as the weak pound in the UK, the largest European market, high raw material costs and declining demand for once-core models.

Ford has around 54,000 employees in Europe and 24 production facilities, according to company data.