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Old 01-11-2019, 07:45 AM   #1
AVANTI R5
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Default Why Ford is restructuring in Europe Again

Quote:
Why Ford is restructuring in Europe again
Michael Martinez
Ford Motor Co. is slashing jobs, closing factories and killing vehicles in Europe.

Sound familiar?

That's because the company did that in 2016.

It did it in 2012, too.

Now, for the third time this decade, Ford is restructuring its money-losing operations in that region. On Thursday, it announced plans to ax thousands of jobs, kill the C-Max and Grand C-Max, end production at a plant in Bordeaux, France, and consolidate its U.K. headquarters. Ford also is reviewing a joint venture in Russia after years of vowing to weather the tough times in the hopes of profitable days ahead.

It's all part of a broader overhaul of its global business under CEO Jim Hackett to create a more "fit" company that maximizes profits.

The Europe issue is a problem Hackett's two predecessors failed to solve.

Alan Mulally, credited with saving the company, tried to save Europe with a massive transformation in 2012. It included thousands of job cuts and multiple plant closures.

At times, it turned contentious. Workers at the soon-to-close plant in Genk, Belgium, at one point blockaded the facility and protested in the streets against management's decision.

The tough decisions helped put Ford on a path toward profitability, but Mulally's successor, Mark Fields, sensed that more needed to be done. Fields in early 2016 announced a smaller-scale plan, offering buyouts to 10,000 salaried employees there in a bid to save $200 million a year in administrative and selling costs. It also gave a vague promise to eliminate unprofitable vehicles over time.

All of that led to a $259 million profit for Ford Europe in 2015 and a record $1.2 billion in 2016, but earnings fell 81 percent in 2017, and Ford said it expected to lose money in Europe last year.

To be sure, there have been some unforeseen wild cards, including the U.K. voting in 2016 to leave the European Union, that have complicated matters and limited the effect of Ford's turnarounds. Still, you could argue that the automaker and its employees, suppliers and other partners have gone through a lot of stress for not much reward.

It's an argument that rival General Motors has used in deciding to exit the region.

But unlike GM, Ford believes Europe has something worth salvaging. Ford is the region's No. 1 seller of commercial vehicles. It also has had success there with utilities including record sales in 2018 and struck gold with the imported Mustang.

Executives say there's a healthy business-within-a-business in Europe, a sort of diamond in the rough that could shine once they trim away the fat.

So Hackett and company are cutting again, with ambitious goals to reach a 6 percent operating margin. For comparison, Ford posted a 4.2 percent operating margin in its record-setting 2016.

In the meantime, unions and workers will protest and morale will sink.

We've seen this part of the story before. It remains to be seen if Ford can write a different ending.
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