Ford, GM tighten belts in Europe

Plant closure, joint projects on the list as US makers act to cut losses.

Production of the 2013 Ford Mondeo has moved to Spain.
Production of the 2013 Ford Mondeo has moved to Spain.

Ford is to close a Belgian assembly plant and General Motors is planning a product-sharing plan with a French rival as the Detroit automakers battle mounting losses in Europe.

Ford said it plans to end production at its car factory in Genk, Belgium, by the end of 2014 and move production of cars such as the Mondeo to Valencia in Spain.

GM said it would co-develop four vehicle projects before 2017 as part of its money-saving alliance with France's PSA/Peugeot-Citroen.

The moves come as each automaker prepares to issue third-quarter earnings reports next week. These are expected to show the mounting toll of Europe's struggles amid North American recoveries, according to industry website, Automotive News.

Ford has forecast that its Europe losses will top US$1 billion (NZ$1.2b) this year, as the region braces for its biggest annual drop in car sales in 19 years. GM has lost nearly US$17 billion in the region since 1999.

Under the Belgian plan, production of the next-generation Mondeo mid-sized car and S-Max and Galaxy minivans would move from Genk to Ford's factory in Valencia.

"The proposed restructuring of our European manufacturing operations is a fundamental part of our plan to strengthen Ford's business in Europe and to return to profitable growth," said Ford of Europe CEO Stephen Odell.

Ford's sales in the European Union have fallen 12.6 per cent in the first nine months in a total market down 7.6 per cent, says industry association ACEA.

In July, Ford said action was needed to "decrease our production to match real demand."

Ford has said it used only 68 per cent of Genk's manufacturing capacity last year, below the 80 per cent threshold usually considered profitable.

The plant is vulnerable because the models it produces are near the end of their life cycles.

Ford reported a second-quarter pretax loss of US$404 million in Europe, compared with a profit of US$176 million a year earlier.

Shutting the Genk factory could save the company about US$500 million, said UBS research analyst Colin Langan.

- NZ Herald

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