Loss of European business Ford considers closing the European factory

Due to sluggish business in Europe, Ford expects its second-quarter profit to drop sharply and is considering reducing its excess capacity in Europe and joining the ranks of automakers that have closed factories.

At present, the operating rate of Ford's European factories is low, resulting in relatively overcapacity. IHS Automotive estimates that Ford's European plant's capacity utilization rate is 66%, which is slightly higher than that of General Motors' 62%; and Morgan Stanley believes that Ford is only 63%, which is lower than that of General Motors. It is usually difficult to achieve profitability when the plant's capacity utilization rate is less than 80%. Ford said it is in the process of formulating adjustment plans to match production capacity with sluggish European demand. Analysts believe that Ford may have closed at least one factory in Europe, and the British Southampton and Belgian Genk Ford plants are all candidates.

The Southampton Ford plant manufactures chassis for the Transit commercial vehicles. According to the IHS Automotive data, the plant has a total of 550 employees. The total output of the plant was less than 30,000 last year, with a production capacity of more than 100,000 vehicles/year and a utilization rate of less than one-third. The Genco plant that produced Mondeo produced 178,000 vehicles last year, with a utilization rate of 68%. Ford said Mondeo's sales in Europe will fall by 11.5% in the first half of this year, while McKenzy will decline by 6.6%. Only Galaxy will grow by 1.4%.

According to analysts' estimates, Ford’s second-quarter operating income fell 8.7% from last year’s $35.5 billion to $32.4 billion, and pre-tax profit plummeted 38% year-on-year to $1.6 billion. The decline in business in the European region is an important reason for the decline in profits. Ford's European sales in June fell 16% year-on-year, while the entire European market fell only 1.7%; Ford's European sales fell 10% in the first half of the year, the whole Europe was 6.3%. Morgan Stanley analysts forecast that Europe's Ford business will lose more than $1.1 billion this year.