Ford manufacturing base ‘dependent on market’

Ford has said the size of its manufacturing base in Europe will be determined by how long the market remains subdued.

While Ford needs capacity in hand to tap any rebound, it has a history of “right-sizing” production and will evaluate the future of plants should that be necessary, said Stephen Odell, head of the US-based company’s European unit.

Industry-wide vehicle sales in Europe totalled 13.6m across 30 countries in 2011, lower than 2007’s pre-slump high of 19m and shy of a more “normal” figure of 17m that Mr Odell believes may not be reached for another five years.

In the short term, Ford will look at taking out more working days while relying on new models to spur sales, he said.

“It’s my job to be profitable at whatever level the market is at,” Mr Odell said. “We’re taking out temporary workers and cutting hours and we’ll continue to do that. In terms of capacity, we will watch it. We’ve been pretty proactive in the past and we’ll have to take a long-term view of how long the industry bumps along at 14m units.”

European car sales hit a 14-year low in March, according to the European Automobile Manufacturers’ Association data, falling 6.6% to 1.5m.

Ford last week said that first quarter net income fell 45% to €1.05bn as a pre-tax loss of €112m in Europe ate into earnings of €1.6bn from North America.

The company is cutting some working days at its plants in Valencia and Cologne, and has also curbed daily rates at a second German site in Saarlouis. Second-quarter European production will be 65,000 vehicles lower than a year earlier, Mr Odell said, equivalent to a 15% reduction.

Ford says that what it defines as the European market will this year shrink to about 14m vehicles, versus 15.3m in 2011, of which it expects to win a “broadly flat” 8.3% share.

Still, its European operations have been profitable in six of the past eight years, and decisions on capacity cuts or re-evaluating plants are “not for the short term”, Mr Odell said.

— Bloomberg


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