LONDON - By mid-May, Ford of Europe Chairman Nick Scheele and his management team will have to make some very difficult decisions. Hardest of all will be whether to end volume car production in the UK, Ford's biggest and oldest European market.
Ford's Dagenham plant is one subject of Scheele's scrutiny. A huge factory in east London, Dagenham was a foundation stone of Henry Ford's global vision for Ford when it opened in October 1931.
Dagenham is at the heart of Ford's debate on how to reduce costs, reverse sliding market share and reinvigorate profits. The plant has been beset recently by problems of racism, absenteeism, low morale and poor productivity.
The issue is politically explosive. The UK's Labor government is already under pressure for doing too little to save jobs at the Rover Group plant in Longbridge, England.
The events surrounding Rover have threatened to turn into a fiasco in recent weeks and could have an impact on the timing of Ford's own decisions. Ford Chief Executive Jac Nasser recently met with UK Prime Minister Tony Blair to discuss Dagenham's future.
The strength of sterling against the euro is forcing auto manufacturers and suppliers to reconsider their strategies because UK-made products are expensive and uncompetitive when exported. The UK has not decided firmly if and when it will join the euro.
In announcing their decision to pull out of money-losing Rover, BMW blamed the strength of sterling and criticized the UK government for its seeming indifference to the manufacturing sector.
Ford, which transferred its headquarters from Warley, England, to Cologne in 1998, is caught in a difficult situation. It wants to increase sales in Europe's largest market, Germany, where it badly trails Volkswagen and Opel. But Ford also wants to maintain its market dominance in the UK.
The British press has already written the obituary for Dagenham. But Ford officials have said repeatedly that a task force looking at Ford's future has yet to make any recommendations. The task force, headed by Ford of Europe President David Thursfield, will deliver its report to Scheele and senior management within a few weeks.
Ford's problems are relatively simple. It produces many more cars than it can sell in Europe, and its model lineup is dated compared to the competition. The solutions, however, are more complex.
Most of Ford's major models could use up more than one plant's capacity at peak volume. Ford needs plants flexible enough to build more than one model and react to demand for popular models.
Ford neglected European-specific product development during its Ford 2000 global restructuring. Certain key models, specifically Ford's all-important Fiesta supermini, were not redesigned as frequently as those of competitors.
Fiesta was face-lifted this year but the company has been disappointed with sales. So Ford has decided to speed up the launch of the all-new next-generation Fiesta by six months, moving the date from mid-2002 to late 2001.
To meet the target, Ford had to find somewhere to build a production line while continuing to make the existing car. Ford had a vacant assembly hall in Cologne where its now defunct full-size car, the Scorpio, had been made until 1998.
Dagenham, the lead plant for Fiesta, had no such extra space. So Cologne will become the lead plant for the next-generation Fiesta. Dagenham would continue to build right-hand-drive Fiestas for the UK at Dagenham, as plans were announced in February.
In the process, Ford decided to trim Dagenham from two weekly four-day shifts to one five-day shift. When that change takes effect in August, a minimum of 1,350 workers will be laid off. Dagenham employs about 7,730 in all. Of those, 4,609 work in vehicle assembly; 1,801 at the diesel engine plant; 1,200 in general services, transport, security; and 121 in the technical training center.
Nigel Griffiths, analyst for Standard & Poor's DRI London office, said Ford might still need Dagenham's capacity.
'Total Fiesta production in Europe was pretty dismal in 1999, about 320,000 units,' he said. Ford would have to sell more like 600,000 units to match segment leaders the Peugeot 206, Renault Clio and Fiat Punto, he said. 'Fiesta used to play with the big boys in volume terms,' said Griffiths.
Ford just might achieve those kinds of volumes if the next-generation Fiesta is a sales success, he said. If it does, Cologne does not have the capacity to handle the kinds of volumes Fiesta and its derivatives might achieve, Griffiths said. Among those derivatives will be a new small minivan.
'There are lots of decisions to be made,' said Griffiths. 'In the end, you've got to lay something down firmly before the other pieces of the jigsaw fall in place.'