Ford's Corporate Transformation (Part 2): Restructuring and Vehicle Portfolio
Closing or selling six plants in Europe, reorganizing products lineup, launching new models in China
2019/09/20
- Summary
- Ford's performance by region: North American earnings are enabling overall corporate profitability, while all other regions are operating in the red
- Ford's concept of reducing its white collar workforce and transforming its organizational structure
- Europe: Redesigning into three business groups with clearly defined aspirations
- China market: Launching 30 new models over the next 3 years, and facilitating design localization
- South America: Closing its heavy-duty truck plant in Brazil and optimizing the scale of its operations to improve profitability
- Sales Forecast by LMC Automotive: Ford Group's vehicle sales in 2022 will be 6.09 million units
Summary
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| The Ford F-150 LTD exhibited at the 2019 Shanghai Motor Show and the 2019 Chengdu Motor Show |
This report is the sequel to "Ford's Corporate Transformation (Part 1): Partnership with VW on CVs, AV and EVs", and covers the following topics:
- Business performance by region in recent years
- Restructuring plans in Europe, China and South America
- Sales forecast by LMC Automotive
Ford's profitability peaked in 2017. However, in 2018 wholesale vehicle sales were down by 625,000 units (5.982 million units sold), automotive operations EBIT was down 33.3% (USD 5.4 billion), and net profit was down 52.4% (USD 3.7 billion). In North America, Ford recorded an EBIT of USD 7.6 billion, while its EBIT in other regions was in the red, resulting in a total deficit amount of USD 2.2 billion (EBIT in the regions was about at breakeven in 2017). The deficits that the company has been running in its South American and China operations have been significant.
To mitigate the situation, prior to the end of 2017, Ford created its "Creating Tomorrow, Together" strategy to transform the company and restore its competitiveness, with plans to start the full-fledged implementation of its approach from 2019. It plans to invest USD 11 billion dollars in restructuring its organization over the next 3 to 5 years.
Firstly, Ford will eliminate 7,000 employees, or 10% of its 70,000 white-collar (salaried) employee workforce. Ford will reduce costs and streamline its organization, eliminate bureaucracy within the company, and transform its organizational structure into one that has the agility to make decisions and take action quickly.
In Europe, 6 plants will be closed or sold to reduce its headcount by 12,000 employees (2,000 of whom will be affected as part of the global reduction of 7,000 salaried employees). Ford's European product lineup and the organization that manages it will be reorganized into (1) commercial vehicles, (2) passenger cars, and (3) imported vehicles.
In the China market, Ford's sales have decreased from 1 million units in 2017 to 550,000 units (LMC Automotive data) in 2018. Ford plans to launch more than 30 new models to meet the needs of the China market over the next three years.
In South America, the company will close its heavy-duty truck plant in Brazil and rightsize its South American operations, and focus more on highly profitable SUVs and pickup trucks.
Ford's restructuring plan is proceeding smoothly, and Ford has announced that it is forecasting that its EBIT (Adjusted EBIT) excluding temporary expenses such as restructuring costs, which Ford places importance on, will increase from USD 7 billion in 2018 to between USD 7 and 7.5 billion in 2019.
Related reports:
Ford's Corporate Transformation (Part 1): Partnership with VW on CVs, AV and EVs (Sep. 2019)
GM: Halting production at 5 plants in N. America, cutting 14,000 workers (Jan. 2019)
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