On Air Now

Listen

Listen Live Now » 93.7 FM Sheboygan, WI

Weather

Current Conditions(Sheboygan,WI 53081)

More Weather »
45° Feels Like: 41°
Wind: ESE 7 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Today

Cloudy 44°

Tonight

Showers Late 37°

Tomorrow

Rain 47°

Alerts

Ford to scrap Belgian plant to stem Europe losses

By Robert-Jan Bartunek and Nigel Davies

GENK, Belgium/MADRID (Reuters) - Ford Motor Co will close a Belgian factory employing more than 4,000 workers, shifting production to Spain as the U.S. automaker scrambles to cut costs and stem European losses.

It was the third time this year that a mass-market carmaker has announced plans to close a plant in Europe as the region's debt crisis, government spending cuts and high unemployment hit consumer budgets and demand for new cars.

Ford said it would shut its Genk plant in eastern Belgium, with the loss of about 4,300 jobs by the end of 2014, transferring the work to a plant in Valencia.

"It's incredible," said Peter Aerts, one of the hundreds of workers who gathered outside the Genk plant where local managers announced the closure to union representatives on Wednesday.

"Just last month I got an invitation to celebrate 25 years working here."

Earlier this year, General Motors Co unit Opel said it aimed to close its Bochum plant in Germany after 2016, while France's PSA Peugeot Citroen said in July it would shutter its Aulnay plant near Paris in 2014.

Ford's British unions were also braced for bad news, after management scheduled a meeting for Thursday and media reports said Ford could also close its Southampton plant where it makes Transit vans and employs just over 500 people.

Ford Europe Chairman Stephen Odell confirmed the meeting but declined to comment further.

Car sales in Europe accelerated their decline in September, shrinking at the fastest pace in the past 12 months. Carmakers have predicted the road to recovery in the region will be a long one, with some not expecting any let-up for two years.

"The outlook for the industry is not very positive for the foreseeable future," said Odell.

'ROUGH SCENES'

Union leader Luc Prenen said European-level managers did not attend the meeting in Genk, leaving local bosses to read a statement.

"After the announcement there were some rough scenes. There was some pushing and shoving but we managed to calm it down," said Prenen, the head of the ACV union. "It was aimed at the management but they left quickly. It was also among each other as people were very angry and frustrated."

Over the past several months, Ford executives have said the automaker's turnaround in North America, which centered on cutting capacity and offering a new, more attractive lineup, may serve as a blueprint for its restructuring in Europe.

From 2006 to 2009, Ford cut North American capacity by about 22 percent, Jefferies analyst Peter Nesvold said in a research note on Wednesday. He added that from 2006 to 2010, Ford also earned an additional $10 billion in revenue from higher vehicle prices.

But Europe's complex labor environment means Ford will focus heavily on its vehicle strategy early on, Nesvold said. By the end of 2013, Ford plans to update more than half the models it sells in the region.

Ford is likely to divulge its European restructuring plans in stages, rather than announce a sweeping overhaul as it did in North America six years ago, he said.

"Ford's transformation in North America was front loaded on the cost front and back-end loaded on the product side," Nesvold said. "We expect the reverse in Europe."

Closing Genk would cut as much as 12 percent of Ford's straight-time production capacity in Europe but the benefits of that move will not be felt until about 2015, Nesvold said.

Ford shares were up 1.9 percent at $10.19 on the New York Stock Exchange on Wednesday afternoon.

'FUNDAMENTAL' TO PROFIT

Belgium is no stranger to factory closures in the auto sector. General Motors shuttered its Opel Antwerp plant in 2010 and French carmaker Renault was slammed for its controversial decision to close its Vilvoorde plant on the outskirts of Brussels in 1997.

The shift to Spain also follows GM's May decision to produce the next generation of its Astra compact car in Britain, after workers agreed a pay deal, leaving its plant in Bochum, Germany, in danger of closure.

Ford's plants in Genk, where the Mondeo mid-size car and Galaxy and S-MAX minivans are nearing the end of their life cycles, and Valencia, which makes the C-MAX and Grand C-MAX compact multipurpose vehicles, have not been running at full capacity.

Grouping production in one place should allow Ford to save money, and wage costs are much lower in Spain than in Belgium.

Odell said capacity utilization was under 50 percent in Genk, and about 70 to 80 percent in Valencia.

He earlier described Ford's European restructuring in a statement as "a fundamental part of our plan to strengthen Ford's business in Europe and to return to profitable growth".

Ford Europe managers, including Odell, met Belgian Prime Minister Elio di Rupo and Employment Minister Monica De Coninck at 1 p.m. (1100 GMT), after a separate meeting with members of the government of the plant's Dutch-speaking home region of Flanders.

'AN UNBELIEVABLE BLOW'

Union leaders boycotted a meeting with Ford Europe executives scheduled for 3 p.m. (1300 GMT) in Brussels as European executives had not made the announcement in person.

"(The closure) came as a surprise and is depressing news for 10,000 people employed directly and indirectly. It's an unbelievable blow for the province of Limburg and for Belgium. It's a black day," Rohnny Champagne, provincial chairman of the ABVV-Metaal union, told Reuters by telephone.

Ford, which will release third-quarter results on October 30, doubled its European loss forecast for 2012 to $1 billion in July and said action was needed to "decrease our production to match real demand".

Third-quarter results from other carmakers showed the region's deepening woes. PSA Peugeot Citroen said on Wednesday third-quarter sales fell 3.9 percent.

Volkswagen's third-quarter profit fell by a fifth as the deepening slump in Europe's car market caught up with the region's biggest automaker.

Ford's Genk plant, which opened in 1964, has operated on a four-day week for much of 2012, unions say, with only 15 more production days planned this year, none of them in December.

In a recent research note, New York-based UBS analyst Colin Langan predicted that Ford would move to close a major plant in Europe, where its factories are running at 52 percent of maximum output on average this year, with Genk the likely candidate.

Closing the factory would cost an estimated $1.1 billion and generate annual savings of $730 million, Langan added.

Production of the C-MAX and Grand C-MAX compact multipurpose vehicles could move from Valencia to Saarlouis, Germany, in 2014 under the proposed plan, it said.

Ford has about 6,000 workers in Spain, including 3,485 in Valencia. It did not say whether jobs would be created but any would be welcome in the region, one of Spain's most indebted with 26.3 percent unemployment.

Unions in Spain said no wage agreement was yet in place. The regional government said no tax incentives had been offered.

"This proves that the infrastructure policies undertaken in recent years ... and most of all our policies on reform and austerity, generate the confidence needed to attract multi-nationals," said Valencia regional chief Alberto Fabra.

(Additional reporting by Philip Blenkinsop in Brussels, Rhys Jones in London, Tracy Rucinski in Madrid and Deepa Seetharaman in Detroit; writing by Helen Massy-Beresford; editing by Anna Willard, Philippa Fletcher and Matthew Lewis)

Comments