Ford\'s Bold Plans For Europe
|   Wednesday, October 31, 2012
Following the drastic measures taken in Europe, the American automaker Ford is planning to become profitable again in the middle of the decade. However, in order to achieve the expected benefits through the harsh measures taken in Europe (such as factories closing down), Ford is conditioned by a few factors.

In 2013, Ford said it would shut down its Southampton assembly plant and Dagenham tooling plant, both located in England. Also, by the end of 2014 the big boys are planning to shut down the assembly factory of Genk, Belgium.
Production of the vehicles and parts made in those locations will be moved to other European factories (like in Turkey). These measures will result in the loss of 355,000 units, or 18 percent, of Ford's European production capacity. Ford said the moves would save between 450 million dollars to 500 million dollars on a yearly basis.

Thanks to the long period of crisis, car sales in Europe have reached their lowest level since 1995. The question of overcapacity was once again put on the table. This situation led to a brutal price war. Volume carmakers have offered average discounts of up to 20 percent in key points of the European markets.

Especially in Europe, this problem has had various people screaming out over the years, yet results have not been up to expectations.
"I am concerned that if we don't find a collective will to resolve this at a European level, this is going to become a permanent crisis," Fiat-Chrysler CEO Sergio Marchionne said this month. Marchionne is also chairman of the European automakers association, ACEA.

Analysts appreciate the decision made by Ford not to wait for an industry wide solution. Adam Jonas, auto analyst at Morgan Stanley said for Autonews: "You have to give Ford management credit. It's brave and it's hard."

Fitch Ratings analyst Brian Bertsch stated, "Ford's restructuring plan is the most aggressive announced thus far in the European auto industry." He continued saying that "If Ford's European competitors do not also sufficiently right-size their capacity in the region, the company will not fully realize the pricing benefits of reduced capacity."

That means that if competitors do not follow suit, or if rivals will continue overproduction, therefore providing facilities for sale, then the entire automotive industry will see its profits go down the drain.

For example, General Motors struggles hard to close its facilities in Europe. The recent move of General Motors was the negotiation to end production at its plant in Bochum, Germany; but that will not happen until 2016, when the Zafira Tourer minivan stops production. GM reportedly had also considered closure of its plant in Ellesmere Port, England. Instead of doing that, it agreed to move production of the Astra compact from Opel's plant in Russelsheim, Germany, to Ellesmere Port and a plant in Gliwice, Poland.
Product cycle plays a huge role in the postponing of factories, a factor that Ford doesn't have any issues with, seeing that the cars manufactured at it closing plants are already near the end of their life.
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