Ford (F) plans to cut hundreds of white-collar jobs in Europe to reduce costs by $200 million a year and revamp its model line-up as it targets sustainable profitability in the region, the carmaker said on Wednesday.
The U.S. company turned a full-year profit of $259 million in Europe in 2015, its first since 2011, helped by a 10% gain in vehicle sales.
It will offer a voluntary redundancy scheme to its 10,300 salaried workers in Europe including severance pay and early retirement, Jim Farley, head of Ford Europe said in an interview on Wednesday, predicting hundreds of takers.
It will also increase its range of sport-utility vehicles (SUVs), which last year outsold all other segments in Europe for the first time, and scrap less profitable models.
“We want to make sure we have that stable footing so we can build a viable business in the future,” Farley said, citing a longer-term operating margin target of 6% to 8%, compared with less than 1% achieved last year.
Ford is following up on a restructuring program under which it closed three European factories and cut thousands of jobs. It shut an auto-assembly plant in Genk, Belgium, in 2014 after closing a stamping plant in Dagenham, Britain, and a van factory in Southampton, Britain, the year before.
That plan stabilized Ford’s European operations and helped increase capacity utilization to about 90%, with some of Ford’s plants including a site in Valencia, Spain, running three-shift, six-day operations, Farley said, adding a plant in Romania producing the B-Max minivan was still underperforming.
Ford and U.S. rival General Motors (GM) have been fighting years of losses in Europe, which in 2014 recovered from a six-year downturn during which demand dropped to a two-decade low.
GM’s European division Opel still made a loss last year but its parent has promised profitability in the region by 2016. Fiat Chrysler Automobiles @fcau(FCAU)posted an adjusted operating profit in Europe, the Middle East, and Africa in 2015 for the first time in years.
Analysts say that although demand has recovered, profitability is destined to stay low in Europe as cut-throat competition and regulatory costs eat into margins.
“The consensus on Europe is that it is a market where the auto industry has little hope of making any money, as it is beset with overcapacity, very high structural costs, and is populated by too many automakers all offering technically sophisticated and expensive-to-build vehicles,” Bernstein analyst Max Warburton said in a note last month.