It’s been speculated that Ford could drop European small cars such as the Fiesta, or even pull out of the continent altogether if all else fails.
It’s been speculated that Ford could drop European small cars such as the Fiesta, or even pull out of the continent altogether if all else fails.

Will the 'reinvented' Ford ditch even more cars?

By Luc Olinga Time of article published Jan 11, 2019

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Dearborn, Michigan - Struggling with a sagging stock price and sluggish sales, Ford took steps to regain its footing this week with the announcement of a massive restructuring effort in Europe - even as it prepared for an imminent strategic partnership with Volkswagen. 

The iconic American brand will roll out a major reorganisation of its European operations to boost profitability, including thousands of potential job cuts.

It was also poised to announce a major alliance with VW next week, as it races to catch up in autonomous and electric car technologies. 

Ford, which employs 200 000 people worldwide, has previously said it wants to cut costs by about $25.5 billion (R350bn) by 2022. 

Ford already stopped producing sedans and small cars US (which saved around R150bn) - and it might also scrap the Fiesta, Focus and Mondeo models in Europe, where they are popular.

Additional cost cutting could include the shuttering of underused US factories, according to Morgan Stanley analyst Adam Jonas, despite President Donald Trump's public pressure on carmakers to maintain their US workforces. 

It could also hit China and Latin America, two markets where Ford is struggling, a source familiar with the plans told AFP. 

In total, the cuts could save Ford $14 billion (R195bn) in its international operations. 

"This is not about making the business today more efficient, but completely redesigning it," said Steve Armstrong, Ford's chief of Europe, Middle East and Africa operations.  

New Ford

Ford's transformation push comes at a time when the motor industry is undergoing major changes as a result of the development of new technologies - accelerated by disenchantment over diesel engines. 

Autonomous and electric vehicles have been expensive to develop, and require either new factories or a complete modernisation of existing ones. 

Ford has been facing the same headwinds as the rest of the low-profit margin industry: trade tensions, a potential global economic slowdown, a slowing Chinese economy, Brexit in Europe, and currency fluctuations. 

The rapid growth of car sharing services such as Uber and Lyft also suggests that automobile groups will have to reduce their production in the future.

Meanwhile, negotiations have been ongoing for months over a Ford-VW partnership to develop autonomous technologies, as well as commercial and electric vehicles. 

The alliance is expected to be announced next week at the Detroit motor show on Tuesday, a source familiar with the matter told AFP.  

"Volkswagen today is a good match. We have different geographical profiles. We both have to improve our business results," Jim Farley, Ford's head of global markets, told reporters Wednesday. 

Howdy partner

Ford also plans to strengthen its partnership with the Indian carmaker Mahindra. 

"Partnering is going to be an important part of Ford's future," Farley said. 

In July, Ford created an independent company, Ford Autonomous Vehicles LLC, to contain its autonomous technologies business. It will invest $4 billion by 2023.  

The company is seeking partners in that venture, as well, while its rivals have already promised to market their first autonomous cars within the next few years. 

CEO Jim Hackett, who is under pressure from financial markets, hopes the initiatives will enable Ford to almost double its operating margin to eight percent by 2020, compared to 4.4 percent in the third quarter of 2018. 

Hackett took the reins in May 2017. A year later, Ford's North American sales fell 3.5 percent, while the industry as a whole rose 1.8 percent. 

In North America, the company will focus on the Mustang sports car, pick-up trucks, SUVs and crossovers - vehicles popular with American consumers. 

In Europe, one of the most competitive automotive markets, it will prioritise commercial vehicles such as vans. The company has not ruled out leaving the continent altogether if its strategy fails, said a source. 

If it does so, Ford would follow the example of GM, which left Europe in 2017 after years of losses by selling Opel-Vauxhall to Peugeot.

Agence France-Presse

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