Ford cuts 1,400 U.K. jobs
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May 12, 2000: 7:13 a.m. ET
Automaker restructures troubled European arm; aims to slash costs by $1B a year
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LONDON (CNNfn) - Ford Motor Co. announced plans on Friday to restructure its struggling European operations, ending auto production at its largest U.K. factory in a bid to cut costs in the region by $1 billion a year.
Ford launched a review of its European assembly plants and suppliers at the start of the year. A combination of overcapacity, turbulent industrial relations and keener competition from rivals battered earnings at Ford Europe last year, at a time when its U.S. parent was enjoying record profits.
Ford Europe Chairman Nick Scheele described the performance of its European business as "totally unacceptable" and said the company would cut its auto manufacturing plants in the region from five to four.
The strike-hit U.K. factory at Dagenham near London is the focus for the shake-up. Ford said it would shed 1,900 jobs there by 2002 as it transfers production of its Fiesta hatchback to its German plant near Cologne.
The company also plans to add 500 jobs at Dagenham's engine unit, reducing the net job loss to 1,400, and will invest $500 million to make Dagenham its global center for diesel engine production.
Scheele said Ford would take an unspecified restructuring charge for the changes.
U.K. auto sector struggles
While labor costs in the U.K. remain below those in Germany, Scheele described Cologne as "a more flexible manufacturing base". The high value of the pound against the euro has also made U.K. exports more uncompetitive.
Ford said Friday it had made a "significant loss" from the U.K. operations last year, after earning £61 million ($92 million) in 1998. While the world's second-largest automaker posted record group profit last year, earnings in Europe slumped to $28 million from $193 million a year earlier.
Ford's announcement, which had been widely expected, is the second blow this week to the British auto industry. Although Munich-based carmaker BMW (FBMW) reached agreement on Tuesday to sell its loss-making Rover Cars unit to a group of U.K. businessmen, the deal will still lead to the loss of about 1,000 Rover jobs.
While Ford's European factories are seen as among the most efficient in the region, the automaker has suffered from a weak product range and increased marketing efforts by rivals.
Ford was consistently Europe's auto industry leader by sales through the 1980s, but has now fallen behind Germany's Volkswagen, by far the No. 1 in the region, and the European unit of U.S. rival General Motors (GM: Research, Estimates).
Ford's European market share last year fell to 9.7 percent from 10.3 percent, according to the European Automobile Construction Association. The U.K. accounts for more than 20 percent of European sales.
Ford has already changed the mix of its European production through a series of acquisitions, buying the car business of Sweden's Volvo last year, following the acquisition of U.K.-based luxury car makers Jaguar and Aston Martin. The company also agreed last month to pay BMW $2.9 billion for its Land Rover sport/utility vehicle business.
Ford (F: Research, Estimates) shares closed up 11/16 at 52-15/16 in New York Thursday.
-- from staff and wire reports
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