Ford to shut Genk factory, move production to Spain
Photo credit: REUTERS
Ford Motor Co. today said it will end production at its car plant in Genk, Belgium, by the end of 2014, pending the outcome of a consultation process with employee representatives.
If the plan is confirmed, production of the next-generation Mondeo mid-sized car, and S-Max and Galaxy minivans, would move from Genk to Ford's factory in Valencia, Spain, the company said.
"The proposed restructuring of our European manufacturing operations is a fundamental part of our plan to strengthen Ford's business in Europe and to return to profitable growth," Ford of Europe CEO Stephen Odell said in a statement.
Ford would free up capacity at Valencia by moving production of the C-Max and Grand C-Max minivans to Saarlouis, Germany.
Ford is seeking to end losses in Europe that the company has forecast will climb to more than $1 billion this year, with the sovereign-debt crisis set to lead to the biggest annual drop in car sales in the region in 19 years.
Ford's sales in the EU have fallen by 12.6 percent in the first nine months in a total market down 7.6 percent, according to industry association ACEA. In July, Ford said action was needed to "decrease our production to match real demand."
Ford reported a second-quarter pretax loss of $404 million in Europe, compared with a profit of $176 million a year earlier.
The plant's shutdown will probably save Ford $300 million a year, Adam Jonas, a New York-based analyst at Morgan Stanley, said. Savings from closing the Genk factory may take three years to be fully realized, he said.
"Ford can't be the only one that does this," Jonas said. "If the rest of the industry doesn't do a Ford, doesn't do a Genk, then Ford subsidized everybody else and paid the price, and you'd still have an industry that really didn't shrink."
Utilization may only be about 50 percent for the Mondeo production line at Genk and 60 percent for the other models, according to an estimate by Michael Robinet, managing director for IHS Automotive.
Genk was considered vulnerable by analysts because the models it produces are near the end of their life cycles. Unions had said last month they were more optimistic about Genk's future after Ford set a date to start production of the new Mondeo there in October next year.
Several hundred Ford workers gathered outside the gates of the plant, as local managers met staff representatives on Wednesday morning. "It's incredible," said one of the workers, Peter Aerts. "Just last month I got an invitation to celebrate 25 years working here."
Ford employs 3,485 workers at its assembly plant in Valencia, where it builds the five-seat C-Max and seven-seat Grand C-Max.
The automaker will start producing the Kuga model there next month and has been expanding facilities to be able to start assembling the Transit Connect light commercial van starting next year.
Valencia's regional government said no tax incentives had been offered in the deal.
"Production is quite a bit cheaper in Spain," said Sascha Gommel, a Frankfurt-based analyst at Commerzbank.
Ford's closure plan is the latest in a wave of efforts to eliminate excess production with the European auto market in the midst of a five-year slump.
PSA/Peugeot-Citroen plans to shut down a factory at Aulnay, near Paris. General Motors is considering ending work at a factory in Bochum, Germany, after closing a plant in Antwerp, Belgium, in 2010. Fiat shut a factory in Sicily last year.
LMC Automotive estimates that unused capacity in the region will rise to as much as 10.6 million vehicles next year from 10.3 million in 2012.
Bloomberg and Reuters contributed to this report