In an effort to restore its European division to profitability, Ford announced substantial job cuts and overall downsizing initiatives through 2020 as it braces for a stagnant European market and an increasingly stringent regulatory environment. The latest developments arrive at an auspicious moment for Ford, as it continues to struggle in nearly every region outside North America.
Ford dominated the news last year when it announced its decision to stop producing sedans and passenger cars for the American market in order to concentrate on trucks and utilities. Consumer preferences in Europe are also shifting towards crossovers, which means Ford cannot rely on the Fiesta and Focus as much as they used to. Complicating matters is the European Union’s latest effort to combat CO2 emissions. The new regulations all but guarantee an electrified version of nearly every vehicle currently on sale in the region. That means Ford has to develop pricey new technology for low margin cars, and the larger, more trendy vehicles that consumers want. Other factors like a no-deal Brexit or the imposition of tariffs by the American government weren’t directly cited by Ford as justification for the latest round of cuts, but it’s likely they played an indirect role in the decision as well.
That is probably why Ford has opted to simply stop offering the Ka in Europe. But the latest round of cuts has also claimed the C-Max lineup as well. And Ford isn’t ruling out the discontinuation of other models like the Mondeo and S-Max either. The company finds itself in this precarious situation after letting nearly every model not named Fiesta or Focus continue without any substantial updates.
How does Ford plan on getting its European division to a six percent operating margin? By devoting resources towards commercial vehicles, in-demand passenger vehicles, and the importation of specialized models like the Mustang and Explorer. It will also cut 2,000 salaried positions and close six factories, which will eliminate about 10,000 jobs. Saarlous Body & Assembly and Valencia Body & Assembly will also face a reduction in output. Those plants are responsible for the C-Max, Focus, Mondeo, Galaxy, Kuga, Transit Connect, and S-Max models, most of which have experienced sales slowdowns.
In addition to pursuing strategic partnerships, Ford hopes an infusion of new crossovers will help turn things around. Case in point: the recently introduced Ford Puma. The Fiesta-based subcompact crossover is aimed towards the premium end of the market, and at Mini buyers specifically. Ford moved slightly over one million vehicles between 2015-2018, down from a high of 1.7 million in 2004. The company clearly wants to focus on higher margin vehicle segments not just in America, but globally too. A prudent course of action in shrinking markets.
Ford’s European troubles are nothing new. And a lot of their current issues were self-inflicted. Today’s announcement also reflects the reality that every automaker is facing in nearly every region: rapidly shifting consumer tastes and the increasing importance of alternative energy vehicles. The company isn’t out of the woods by any means, and it’s possible they’ll mimic General Motors and pull out of Europe completely if things don’t improve. In any event, look for Ford to replicate their approach to the Puma in more vehicles and in regions outside of Europe.