Ford’s move to close two plants in Europe might force GM and other automakers in the region to choose tough restructuring plans to cut losses.
Recently Ford surprised analysts by announcing it expects a $1.5 billion loss in Europe by the end of this year, up from the $1 billion forecast in July. The company also said it expects to lose the same amount of money next year too and profits should come by ‘mid-decade.’ To make the announcement even more frightening, the automaker also said next year it will close two more plants in the UK, in Southampton and Dagenham. The news came one day after Ford said it will move production from the Genk plant, Belgium to an underutilized plant in Valencia, Spain.
Analysts fear that Ford might start a ‘trend,’ pushing the other automakers to close plants in Europe in order to cut costs. Currently automakers on the continent offer heavy discounts to keep market share, but this only make them lose fortunes.
“Can Ford’s distressed EU peers follow suit for a more meaningful rebalancing of supply with demand?” asks Adam Jones at Morgan Stanley in a report to clients.
GM, who struggled in Europe for the past 10 years, with no profit, announced its plans to save $2 billion a year in costs by jointly producing four models with its partner PSA Peugeot Citroen. In 2010 GM closed a plant in Antwerp, Belgium, and replaced for the second time this year Opel’s CEO. The automaker said it managed to avoid closing the Ellesmere Port plant in England due to the “wage, productivity and investment package” negotiated with the labor union.