Ford plans to invest up to $4.8 billion in its German operations, hoping to kick start is flagging European sales. The company’s German business is in the midst of a significant transformation, focused on cutting costs and becoming more competitive.
Ford Vice Chairman John Lawler said the company’s supporting the transformation of its European business with the $4.8 billion investment.
The current efforts have seen Ford cut thousands of jobs in Europe, including Germany. The European market is sluggish right now, and Ford isn’t alone in revising its operational efforts. Volkswagen been making cuts as it fights for sales.
“By recapitalizing our German operations, we are supporting the transformation of our business in Europe and strengthening our ability to compete with a fresh product portfolio,” said John Lawler, vice chair of Ford Motor Co.
“To build a sustainable business in Europe, we also need to continue to simplify our governance, reduce costs and drive efficiencies,” Lawler noted, according to Reuters.
The investment
Ford’s financial commitment is designed to relieve pressure on its Ford-Werke German subsidiary, which “overborrowed” and now has a $5.8 billion liability.
The commitment takes the place of a deal with Ford that the automaker would cover the German subsidiary’s losses. The agreement’s been in place since 2006, so the revision has drawn the ire of Germany’s powerful IG Metall labor union.
The company said it would reduce production of its Explorer and Capri EV models at its Cologne plant.
However, without the agreement, Ford’s German unit “could become insolvent in the coming years if the economic situation does not improve and the parent company in the USA is no longer able to offset the losses,” IG Metall said.
German changes
Ford began making changes in Europe last fall. Like many of its rivals, Ford is looking to cut costs as electric vehicle sales slow to more manageable rates.
The automaker said it planned to cut about 14% of its workforce, or 4,000 people, in Europe due slow EV sales. Germany faced the brunt of the cutbacks with about 2,900 workers being let go. The company said it would reduce production of its Explorer and Capri EV models at its Cologne plant in Germany.
An additional 800 workers were supposed to be released in the U.K. with 300 more losing jobs around Europe, Reuters reported. The layoffs were scheduled to take place over the next three years, winding up by the end of 2027.
More Ford News
- Ford Keeps Scaling Back, Cutting Bronco Production, European Workforce
- Ford Shifts EV Plans
- First Look: 2025 Ford Expedition — More Rugged, More Tech and a New Split Gate
VW cutting too
Ford CEO Jim Farley is looking continue the streamlining efforts in Europe.
In December, Volkswagen reached an agreement with its German labor union to cut as many as 35,000 jobs in Germany – though the automaker agreed not to order immediate layoffs or plant closures and dropped a demand for 10% wage cuts.
The move avoided a mass walkout by members of the IG Metall union but is billed as a way to curb VW’s bloated labor costs, among the industry’s highest. The settlement will save about 15 billion euros — $15.6 billion at current exchange rates — in the medium term, VW said.
The new deal with IG Metall does not call for immediate plant closures or layoffs, nor wage cuts, and will not impact costs in 2024. But some facilities — including one in Dresden, another in Osnabrueck — could be sold or repurposed at a later time.
The most immediate impact will be felt at VW’s headquarters plant in Wolfsburg, Germany where two of four production lines will be dropped. And while VW dropped demands for a 10% wage cut, it will eliminate or reduce some bonuses.
0 Comments