Ford Motor Co.
) plans to cut two shifts at its Craiova Assembly Plant in
Romania to one as market conditions in Europe continues to
deteriorate. With this, the automaker will reduce production
capacity at the plant to 250 vehicles per day from 500 vehicles
per day. As a result, the company is likely to produce nearly
30,000 vehicles at the plant this year in stark contrast to its
previous plan of 60,000 vehicles.
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The Craiova plant employs 3,600 people and produces Ford's B-Max
mini multi-purpose-vehicle (MPV), launched in Europe this year
and based on the same platform as the Fiesta subcompact. Ford
plans to offer buyouts to some hourly workers as part of its
capacity reduction plan.
Ford also plans to transfer nearly 500 employees to the engine
plant in Craiova for the increased production of 1.0-liter
turbocharged engine and support the launch of the new 1.5-liter
engine. The company is running a "limited voluntary separation
program" for hourly workers with more than four years of service
at the plant.
The present Euro zone financial crisis has affected the
operations of many global automakers, especially Ford and
General Motors Company
). Both the automakers have a significant exposure to the market.
Recently, Ford revealed that it would retrench 6,200 jobs and
close three facilities in Europe. The company plans to shut down
a van factory in Southampton, Britain and an associated stamping
and tooling facility in Dagenham, east London in 2013 as well as
a major plant in Genk, Belgium the following year. These
production cutbacks are expected to save about $450 million to
$500 million in annual costs.
Ford saw a broader operating loss of $468 million in the third
quarter of the year in Europe compared with $306 million a year
ago. The decline was attributable to lower volume, offset
partially by lower costs and favorable exchange rates. Further,
the company expects to lose $3 billion in the region considering
both 2012 and 2013.
In order to reverse the 12 years of losses in Europe,
particularly from the Opel brand, GM formed a global alliance
PSA Peugeot Citroen
). The pact will help both the automakers reduce at least $2
billion in costs. In order to strengthen the market position, GM
also plans to expand Opel's line up by introducing 23 models by
Ford, a Zacks #3 Rank (Hold), posted a 17.6% rise in earnings per
share to 40 cents in the third quarter of the year from 34 cents
a year ago driven by impressive results in its North American
operation and, to some extent, its Asian operation. With this,
the company has also beaten the Zacks Consensus Estimate by 10
cents per share. Total profit rose 15.6% to $1.6 billion from
$1.4 billion a year ago.
However, total revenue in the quarter slid 3.0% to $32.1 billion
due to lower revenues in South America, Europe and Financial
Services operations that offset the marginal improvement in
revenues in North America and Asia. However, revenues were higher
than the Zacks Consensus Estimate of $31.0 billion for the
Ford plans to restore profitability in its European operations by
mid-decade and aims to achieve a long-term operating margin
between 6% and 8%. The company continues to anticipate 2012
market share in Europe to be lower than 8.3% in 2011.