Ford Motor Co.
) agreed to pay $750 million as separation benefit to 4,000
hourly workers under a deal at its Genk, Belgium plant, which
will be shut down by the end of 2014 due to the ailing European
market conditions. However, Ford is yet to reach a deal over
severance payment with the plant's 300 salaried workers.
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The severance payments will be treated as a special item for
accounting purposes and spread over the next several quarters
depending on the timing of the workers' exit.
Currently, the Genk plant produces Mondeo sedan, which is known
as the Fusion in the U.S. After the closure, Ford will transfer
the work in Genk to its plant in Valencia, Spain.
The amount of severance payments will depend on age and
seniority. Workers aged 50 or less will receive up to
two-and-a-half years of pay while workers aged 52 or more will be
entitled to a bridging pension until they reach 65.
The cash payout implies an average payout of $187,500 for hourly
workers. This is less compared to what
General Motors Company
) paid as severance benefit in 2010 before closing its facility
in Antwerp, Belgium General Motors paid nearly $527 million to
2,600 workers at its Antwerp plant, implying an average payout of
Late 2012, Ford had revealed that it would cut production
capacity by 18% in Europe on top of its recent downsizing in the
continent if the market conditions deteriorate further. Ford had
revealed that it would retrench 6,200 jobs and close three
facilities in Europe.
The company had announced plans to shut down a van factory in
Southampton, Britain and an associated stamping and tooling
facility in Dagenham, east London in 2013 apart from the Genk
plant. These production cutbacks are expected to save about $450
million to $500 million in annual costs.
In 2012, revenues from Ford's European operations shrank 21.3% to
$26.6 billion. The region had a much broader operating loss of
$1.75 billion in the year compared with $27 million a year ago.
The decline was attributable to unfavorable volume and mix. In
2013, Ford expects to lose $2 billion in Europe as it continues
to be negatively affected by challenging economic conditions.
Car sales in Europe dipped 10.2% to 829,359 units in February,
according to the European Automobile Manufacturers' Association
(ACEA), driven by continued weak demand and troubles faced by
highly indebted banks in financing new car purchases for
Among the U.S. automakers, Ford saw the steepest decline in sales
in February. The automaker's sales plunged 20.8% to 53,660 cars
in February. It was followed by General Motors, which registered
a 20.1% fall in sales driven by a 38% decline in Chevrolet brand
sales. Among the European automakers,
) - biggest in the continent - posted a 7.2% decrease in sales,
led by a 12% fall in its Skoda brand sales.
Korea's Hyundai Motor Corp., and Japan's
Honda Motor Co.
) and Mazda are the only three automakers that registered sales
gains in Europe during the month. Sales at Hyundai went up 1.4%
while sales at Honda and Mazda escalated 27.0% and 13.1%,
Currently, Ford retains a Zacks Rank #3 on its stock, which
implies a Hold rating for the short term (1 to 3 months).