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MarketScreener Homepage  >  Equities  >  Nyse  >  Ford Motor Company    F

FORD MOTOR COMPANY

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Ford Motor : Cuts Europe Staff by 20%

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06/28/2019 | 02:48am EST

By William Boston and Mike Colias

BERLIN -- Ford Motor Co. laid out plans to close factories in Europe and cut 12,000 jobs, or more than 20% of its European workforce, aiming to return to a profit in the region and focus on technologies that are reshaping the auto industry.

The auto maker had broached the revamp of its European operations in January as part of a broader cost-cutting effort, with the company pivoting toward electric vehicles and autonomous driving. Ford, which has struggled to maintain profitability in Europe for years, said Thursday it would shrink its manufacturing footprint in the region to 18 plants from 24 by the end of next year.

The company aims to rely more on imported passenger cars and locally built, higher-margin commercial vehicles for its sales in Europe, where auto makers are now struggling with sluggish consumer demand after years of growth.

Ford's pullback in the region, the latest retreat by a big U.S. car maker, comes as European regulators are establishing some of the strictest emissions regimes in the world -- which combined with high labor costs figures to pressure auto makers' bottom line.

Ford and rival General Motors Co. for decades added factories world-wide and built sales forces across far-flung regions to achieve scale in a capital-intensive business. But in recent years they have trimmed their sails, redirecting investment to their strengths, primarily building pickup trucks and sport-utility vehicles.

Ford's share price has risen by a third this year on the view of some investors that the turnaround mapped out by Jim Hackett, who was installed as Ford CEO in 2017, is beginning to gain traction.

"Ford's plan may be more comprehensive than appears at first blush," Bank of America analyst John Murphy wrote in a research note last month, when he raised his rating on Ford shares to a buy.

Ford shares rose 2.9% to $10.20 on Thursday.

Mr. Hackett still faces pressure to move more quickly to boost profitability, though recent restructuring moves appeared to damp criticism. The auto maker last month said it was cutting 7,000 salaried positions and overhauling its money-losing South America business.

Ford has a long road to recovery. The company lost money in each of its overseas businesses last year, including a $1.5 billion loss in China, where it had been making money. Mr. Hackett recently installed a new management team in China to attempt a turnaround in the world's largest auto market.

Ford unveiled plans for a global restructuring in October and has been fleshing them out since.

In January, Ford said job cuts in Europe would hit a "significant number of the 50,000 we employ" in the region, as it aimed to turn European losses into a 6% profit margin in the next few years. Ford has since laid out plans for deep cuts in Germany, France, the U.K. and Russia.

"The cuts are very broad-based," Stuart Rowley, president of Ford's European business, told reporters on a conference call Thursday. "Ford will be a more targeted business in Europe, consistent with the company's global redesign, generating higher returns through our focus on customer needs and a lean structure."

Ford said stepped-up imports would consist of "a niche portfolio of iconic passenger vehicles" that would include the Mustang, the Explorer and a new fully electric sport-utility vehicle.

Ford's overhaul comes as auto makers in Europe face demands by regulators to meet tougher greenhouse-gas emissions limits next year, possibly the first annual sales decline in six years, and the uncertainty of global trade tensions and a slowing economy.

GM exited Europe in 2017 by selling its business to French car maker PSA Group, citing the toughening regulatory environment and its own middling position in Europe. GM has said that it wants to compete only in markets where it can be a top-two player, leaving it focused on North America, China and South America.

Fiat Chrysler Automobiles NV, which is firmly rooted in Europe, is looking to beef up in the region, most recently through a proposed merger with Renault SA. Those plans fell apart earlier this month.

Ford is No. 6 by sales in Europe, with a 6.3% market share this year through May. The strategy outlined Thursday is focused more on boosting profitability than lifting sales volume. Its commercial-van market share in Europe is 14% with "great profitability," Ford strategy chief Jim Farley told analysts earlier this year.

Ford and Volkswagen AG recently said they would create an alliance to produce light commercial vehicles. Mr. Rowley said the talks, which are expected to conclude soon, were on track. He declined to elaborate.

Ford has about 51,000 employees in Europe, and almost 200,000 world-wide as of last year. The reduction in European manufacturing will result in the loss of around 5,000 jobs in Germany, 3,000 in the U.K., more than 2,000 in Russia and nearly 1,000 in France through the closure of a plant in the Bordeaux region.

Ford has been negotiating with local trade unions -- which have more say over such restructuring measures than labor representatives in the U.S. -- about a number of plant closures. Those talks have now been concluded and Mr. Rowley said the bulk of the job cuts would be completed by the end of next year.

Ford has also agreed to sell its Kechnec transmission plant in Slovakia to automotive supplier Magna International Inc.

--Nathan Allen contributed to this article.

Write to William Boston at william.boston@wsj.com and Mike Colias at Mike.Colias@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
FORD MOTOR COMPANY 0.67% 9.07 Delayed Quote.17.78%
GENERAL MOTORS COMPANY -0.76% 35.11 Delayed Quote.5.77%
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Financials (USD)
Sales 2019 146 B
EBIT 2019 5 567 M
Net income 2019 2 105 M
Finance 2019 7 233 M
Yield 2019 6,62%
P/E ratio 2019 17,7x
P/E ratio 2020 8,94x
EV / Sales2019 0,20x
EV / Sales2020 0,21x
Capitalization 35 724 M
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Mean consensus HOLD
Number of Analysts 21
Average target price 10,21  $
Last Close Price 9,07  $
Spread / Highest target 43,3%
Spread / Average Target 12,5%
Spread / Lowest Target -11,8%
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Managers
NameTitle
James P. Hackett President, Chief Executive Officer & Director
William Clay Ford Executive Chairman
Timothy Stone Chief Financial Officer
Jeff Lemmer Chief Information Officer & Vice President
Kenneth E. Washington Chief Technology Officer
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