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Ford’s New Plan for Europe: Fewer Jobs, More SUVs

Ford launched its new Puma SUV this week. Ford launched its new Puma SUV this week.
Ford launched its new Puma SUV this week. Courtesy of Ford.

Ford has revealed a grand restructuring of its European operations, which will allow it to focus more on the commercial vehicles sector and the sale of SUVs—many of which will be on the smaller side to suit the European market.

The restructuring also involves the loss of 12,000 jobs, though these have already been announced piecemeal over recent months—examples include the proposed closure of Ford's Bridgend engine plant in Wales, and a raft of factory cuts in France and Russia.

A total of six European facilities will be sold or shuttered. As a result of the overall restructuring exercise, Ford said, its European financial results would "significantly" improve for 2019. The continent was a loss-maker for Ford last year, partly thanks to declining demand, but then again so was every region except for North America.

"Ford will be a more targeted business in Europe, consistent with the company’s global redesign, generating higher returns through our focus on customer needs and a lean structure," said Ford Europe President Stuart Rowley in a statement.

New structure

The restructuring creates three new business groups, covering commercial vehicles, passenger vehicles, and imports.

Ford is already the European market leader in vans and pickups, and it hopes to double its profitability in this segment within the next five years.

The company will also push its passenger vehicle business hard in Europe. It wants to triple its imports in this segment by 2024, with models including an "all-new Mustang-inspired fully electric performance utility" that will appear late next year.

Indeed, Ford seems to be placing a lot of emphasis on the SUV sector, promising three new models in the next five years—all of which will come with an electrified option. "A future family of battery electric vehicles will be assembled in Europe," the company said.

Europeans have a well-deserved reputation for buying smaller cars, but they are also increasingly buying SUVs—albeit on the more compact side. In fact, SUV sales have recently been offsetting declining sales in more traditional segments.

This week, Ford unveiled a small, new SUV for the European market: the Puma, which is based on the same small-car platform as the Fiesta.

The aim is for the Puma to tempt customers away from the small SUVs being sold by European brands such as Renault and Peugeot—and, perhaps surprisingly, also from premium compact-car brands such as BMW's Mini. Ford claims the Puma, which will be released next year, offers best-in-class trunk space.

Job cuts

Ford is not the only carmaker to be cutting thousands of jobs—so are GM, Volkswagen and (reportedly) Daimler.

Many manufacturers are restructuring as customer tastes shift, as electrification becomes a must-have due to stricter emissions standards, and as autonomous vehicles loom on the horizon. Electric and self-driving cars are expensive to develop.

In its Thursday announcement, Ford said its European cuts would reduce its manufacturing-facility footprint in the region from 24 to 18. With 12,000 jobs set to go—Germany, the U.K. and Russia are being hit hardest—that means a European workforce reduction of around 22%.

"Separating employees and closing plants are the hardest decisions we make, and in recognition of the effect on families and communities, we are providing support to ease the impact," said Rowley. "We are grateful for the ongoing consultations with our works councils, trade union partners and elected representatives."

Union members at the Bridgend plant held a consultative ballot a couple weeks ago in which they overwhelmingly decided to keep the possibility of strikes on the table. However, no industrial action is planned for now.

Ford said Thursday that its long-term goal for Europe was to deliver a 6% margin on earnings before taxes and interest.

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