Ford announced it is starting consultations with its union partners and other key stakeholders to implement a comprehensive transformation strategy aimed at strengthening the Ford brand and creating a sustainably profitable business in Europe.
The strategy – which is part of the company’s broader global vision of providing smart vehicles for a smart world – will offer differentiated vehicles designed to create a deeper connection with Ford customers.
In the near-term, Ford says it is” accelerating key fitness actions and reducing structural costs.” This fundamental redesign will include changes to Ford’s vehicle portfolio, expanding offerings and volumes in its most profitable growth vehicle segments, while improving or exiting less profitable vehicle lines and addressing underperforming markets.
“We are taking decisive action to transform the Ford business in Europe,” said Steven Armstrong, group vice president and president, Europe, Middle East and Africa. “We will invest in the vehicles, services, segments and markets that best support a long-term sustainably profitable business, creating value for all our stakeholders and delivering emotive vehicles to our customers.”
Ford is entering into formal consultation with its Works Council and trade union partners, and is committed to working together with all key stakeholders to enable the new strategy.
To improve near-term financial performance, Ford will be reducing the complexity of existing Ford products, optimizing the most profitable vehicle configurations and increasing volumes of profitable vehicle lines.
Structural cost improvements will be supported by reduction of surplus labor across all functions – salaried and hourly. An improvement in management structure, announced in December, already is underway through Ford’s redesign of its global salaried workforce, which the automaker says will improve the agility of the organization.
Ford aims to achieve the labor cost reductions, as far as possible, through voluntary employee separations in Europe and will be working closely with social partners and other stakeholders to achieve this objective.
Future business redesign
Ford is establishing three customer-focused business groups in Europe – Commercial Vehicles, Passenger Vehicles, and Imports – each with clearly defined aspirations and dedicated organizations. The company says this new operating model will better enable the businesses to make fast decisions centered on customer needs.
Ford of Europe is targeting a 6 percent EBIT margin longer term, with returns in excess of the cost of capital for each business group.
Every Ford nameplate from the all-new Ford Focus onward will include an electrified option. This includes new nameplates and new versions of existing vehicles. From Fiesta to Transit, either a mild-hybrid, full-hybrid, plug-in hybrid or full battery electric option will be offered.
Ford also will build on its success in the growing utility segment in Europe. Ford SUV sales – comprising EcoSport, Kuga and Edge – hit a record high in 2018, surpassing a quarter million vehicles sold for the first time.
A niche portfolio of imported iconic nameplates for Europe that builds on the heritage of the Ford brand will include Mustang, Edge, and another SUV to be revealed in April, along with an all-new Mustang-inspired full-electric performance utility in 2020.
Additional efficiency actions
Ford’s new strategy will result in a more efficient and focused business. Key actions already underway include:
- Production at the Ford Aquitaine Industries plant in Bordeaux, France, which manufactures small automatic transmissions, will end in August 2019.
- Formal discussions have begun between Ford and its Works Council to end production of the C-MAX and Grand C-MAX at the Saarlouis Body and Assembly Plant in Germany as the compact MPV segment shrinks in Europe.
- Ford is undertaking a strategic review of Ford Sollers, its joint venture in Russia. Several significant restructuring options for Ford Sollers are being considered by Ford and its partner, Sollers PJSC. A decision is expected in the second quarter.
- Ford plans to consolidate its U.K. headquarters and Ford Credit Europe’s headquarters at the Ford Dunton Technical Center in South East Essex to improve business fitness and create a customer-centric technical hub. The action is subject to union consultation and local approvals.
“Working collectively with all stakeholders, our new strategy will enable us to deliver a more focused line up of European-built passenger vehicles, while growing our import and commercial vehicle businesses – for a healthier and more profitable business,” added Armstrong.
Ford says it will provide specific details of its strategy in the coming months, once appropriate formal consultation with its Works Council and trade union partners has concluded.