Ford announced a restructuring of its European operations last week that will see the closure of its Genk assembly facility in Belgium as well as two facilities in the UK: the Ford assembly plant in Southampton and its stamping and tooling operations in Dagenham. It means the loss of 5,700 jobs and the closure of the assembly plants equates to an annual reduction of 355,000 units or 18% of total Ford capacity in Europe.

The closure of the Genk plant is planned for 2014 subject to the outcome of a consultation process with workers groups. Ford is proposing that assembly of the Mondeo, S-Max and Galaxy minivan currently made there could shift to its Valencia plant in Spain. The carmaker is also looking at moving C-Max and Grand C-Max production at Valencia to Saarlouis in Germany in 2014 as a consequence. And it has looked at moving Transit chassis model production from Southampton to its LCV plant in Kocaeli, Turkey.

“The Turkish plant is a natural fit for the Transit, but the switch of those passenger models to Spain from Genk has meant a proposed location switch of the C-Max and Grand C-Max to the plant in Saarlouis, Germany, which produces the Focus,” said Julian Buckley, principal analyst with IHS Supplier Business. “This is a good plan, however, as these two models share the same C1 MCA platform and a high percentage of parts. There will be up-front costs associated with moving C-Max production, but once in place the OEM could realise savings in terms of shared tooling and a more streamlined part logistics set up.”

Ford said the restructuring will reduce assembly capacity in Europe, excluding Russia, by 18% or 355,000 units and will bring the company savings of between $450m and $500m.

“Although it’s unfortunate that Ford has deemed it necessary to close a series of production locations in Europe, the division is expected to announce losses over 2012 of up to $1.5 billion and costs had to be cut out of the system,” said Buckley.
“Executives at Ford are being pragmatic when deciding to close the production facilities in Genk, Belgium and Southampton, UK. The Belgian plant, which builds the Mondeo range and the S-MAX and Galaxy MPVs, has come to be underutilised as year-on-year sales of the Mondeo have declined over the past decade.”

Those costs will now include about $100m of accelerated depreciation associated with the plant closures and more than $400m related to dealer stock reductions.

Buckley went on to say that as the three models are based on the same platform and share a reasonably high percentage of parts, there may have been an opportunity to merge production of all three onto one of the plant’s two assembly lines, but that the state of company finances meant Ford saw it as necessary to shutter the full facility.
At the same time, Ford is currently pursuing a strategic shift to reduce vehicle inventory at its European dealerships. The company said that the move had been enabled by recent improvements in vehicle logistics and IT systems that have sped order-to-delivery.

“Reducing stock levels at dealerships lowers financing costs for dealers, which is particularly important during this time of continuing decline in the new vehicle sales market,” said the company in a statement. “It also reduces the need for discounting to clear out older stock, which will have positive effect on residual values for customers, and will enable quicker vehicle delivery to our customers.”

In other news from the US, Ford has also announced the sale of its last remaining Automotive Components Holdings operation – the climate control business currently located at the Sheldon Road plant in Michigan – to Detroit Thermal Systems, a joint venture between a joint venture between Valeo and V. Johnson Enterprises.