By on October 22, 2012

Union representatives at Ford’s Genk plant in Belgium have been summoned to an emergency meeting on early Wednesday morning. No reason has been given, but unions expect the worst, says Reuters: The closure of Ford’s Genk factory.

“No one is allowed to tell us anything,” an official of the ABVV Metaal union told Reuters. “We’re assuming it will be a very serious announcement.” Ford declines to comment.

Rumors of a plant closure had been swirling since Ford doubled its European loss forecast to $1 billion in July and said that Ford Europe needs to “decrease our production to match real demand”. Ford’s EU sales were down 14.9 percent in September and 12.6 percent for the year.

The plant employs 4,300 workers which make the Mondeo, the Galaxy and the S-MAX minivans. All are at the end of their life cycle.

Ford will present third-quarter financial results on Oct. 30. UBS analyst Colin Langan said that Ford’s European factories are running at 52 percent of capacity, and predicted that “Ford is most likely to close its assembly plant in Genk,” due to the plant’s “consistently low utilization level”.

Contrary to conventional wisdom, it is fairly easy to close a plant in Europe. However, it is obscenely expensive. Workers must receive generous severance payments. Langan figures that closing the Belgian factory would cost some $1.4 billion, or $332,000 per worker, against annual savings of $730 million.

 

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22 Comments on “That’ll Hurt: Ford Thought To Close Belgium Plant. Price Tag $1.4 Billion...”


  • avatar
    raph

    How does that trite saying go; No pain, no gain.

    Ford would start saving 730 million in a little less than 2 years especially in light of the over capacity problem they are facing.

    Seems like an easy choice to me.

  • avatar
    el scotto

    Assuming Ford shuts the plant down, what will the numbers look like? Many on here would say smart move, the EU is imploding,and the bleeding has to stop. If the EU recovers and in 5-6 years everyone and their brother wants a new ride; what would it cost to reactivate the plant and (hopefully) bring the skilled workers back?

    • 0 avatar
      geeber

      During the severe 1980-82 recession in the United States, Ford slashed capacity by closing several plants, while instituting changes to make the other plants more productive.

      When the American market began recovering in 1983, Ford was able to make the same number of vehicles that it had in 1978 with fewer plants and workers. Profits went through the roof – by 1987, Ford was outearning GM. Quality improved dramatically, too.

      Once this plant has been shut down, I doubt that Ford will bring it back. If Ford does shut down the plant, I’m sure that the ultimate goal will be to utilize existing capacity more efficiently.

    • 0 avatar
      dtremit

      Given the status of tariffs, that seems unlikely. Ford can build cars in Mexico for duty-free export to both the US and Europe — and at a much lower cost. Once it’s gone, it’s gone.

      • 0 avatar
        tresmonos

        The only Mexico plant with ‘capacity’ is Cuatitlan. Highly unlikely seeing it’s tooled up for the B car (Valencia is chugging along just fine). Plants in NA with capacity: Flatrock. Not sure of Eastern EU, but that’s where you’ll likely see some production sourced from.

      • 0 avatar
        dtremit

        @tresmonos True enough, today. Do you know how many Fusions Flat Rock is likely to have capacity for?

        In any case, though, I was speaking to what they’d do if they closed Genk and needed capacity back. It seems like they’d have a lot of more attractive options — including building new facilities in Mexico, or as you say, in eastern Europe — than reopening Genk. It might be easy to reactivate it, but then you’d be stuck with the same problems if you ever wanted to shut it down again.

      • 0 avatar
        tresmonos

        I agree with you. I’m betting the St. Petersburg is the likely candidate to take on volume as it makes the Mondeo (the Otosan, Turkey plant spits out the Transit).

        As for capacity, I would assume Flat Rock can run @ the same capacity of Hermosillo, maybe more since I think it’s body shop is ‘flexible’ and I believe HSAP has yet to receive that upgrade. It has already been announced it will add a shift.

      • 0 avatar
        DeadWeight

        Ford’s going to have even bigger problems with their new Edge getting beaten up on some more by Consumer Reports, and with the less-than-stellar reviews coming in regarding the 2013 Fusion (Car & Driver’s test mentioned the dashboard “lighting up like a Christmas Tree” with warnings and malfunctions, a pathetic 22.8 mpg in combined driving with the 1.6 liter turbo, along with some of the tightest interior dimensions in its class).

      • 0 avatar
        tresmonos

        Deadweight:
        Is that the same report in which they also ‘un-recommend’ the Civic and Prius C? Or did they conjure up some more hatorade on the Edge? The Edge hasn’t ever been a CR love child. MFT was introduced to CR via the Edge and it hasn’t recovered, since. I would be interested to see what the latest info is, if there is any.

        As far as the Fusion – those press cars were made ~ 6 months prior to retail sale of the platform. It’s no surprise those pre-production units have their issues. Complaining about the 1.6? I think you’re nuts – it’s the only powertrain where you can pair up a 6 speed manual. Keep your fingers crossed that the consumer choice will be lucky enough to cherish that past the first MY due to capacity.

    • 0 avatar
      tresmonos

      That is the point of a standardized QOS/PS. You don’t have to retain skilled workers – you can upstart a plant from nothing in a short amount of time. See: 2010 Fiesta. Cuautitlan had a skeleton crew of management and no hourly workers (and no product) for a few years prior to that launch.

      Globalization, profit. I’m not even going to dive into the quagmire of political discussion. If you want to be in manufacturing, you better get used to Hotel living and flying. I haven’t been home for more than 40 total days since June of 2011.

  • avatar
    Viquitor

    About a decade ago a friend of mine used to drive a hand-me-down, Genk-built Mk.2 Mondeo. It was the best built Ford I’ve ever seen.

    Anyway, I still think Ford will withdraw from Europe altogheter if the situation there gets any worse.

    • 0 avatar
      geeber

      I doubt that Ford would withdraw from Europe completely. It’s still a huge market, even with its current troubles. Ford is the number-one selling brand in Great Britain, if I recall correctly. Closing this plant will help the company match capacity with demand, and put more pressure on weaker players (GM, PSA, Fiat).

  • avatar
    28-Cars-Later

    Ford can’t extort some zero percent loans or tax breaks from EU to keep it open and build cars for export? I know this idea has been floated for Opel, Peugeot, and Fiat may already be doing it, but to me its kinda like a pyramid scheme: the early adopters win and the later players lose their shirt. All of these companies will not be allowed to fail at once, Ford may be able to buy some time for their factory and benefit if they could keep the lights on in Belgium when the lights go off in competitor plants in France, Germany, and UK.

    • 0 avatar
      rnc

      None of those companies can extract loans, Ford is going to close this plant at a premium. PSA, Opel and Fiat workers will demand the same if they try to closures, but Ford is much healthier, it’s a brilliant strategy for thinning out the number of makers to increase market share.

  • avatar
    icemilkcoffee

    The downward spiral that austerity begets.

    • 0 avatar
      geeber

      Several of these countries were spiraling downward prior to the adoption of any austerity measures. “Austerity” didn’t cause the problems in the first place.

    • 0 avatar
      Silvy_nonsense

      Austerity is a response to the problem of profligacy. Despite what many seem to think, you can’t fix overspending and mismanagement by spending more and managing worse. What do you recommend as a cure for a bad sunburn? A few more hours in the sun?

  • avatar

    I note that a recent post from ConsumerReports Magazine in that they have downrated the Ford Edge here in North America, this won’t help there sales here either. Europe is another matter entirely!

  • avatar
    Cammy Corrigan

    Hmmmm….something doesn’t make sense here.

    A few weeks ago, Ford gave aasurances to the Belgian union that the new Aston Mar…..er Mondeo would be built in Belgium. That’s why there were reports of the unions being more optimistic of the future of Genk. Now, Ford may close the factory down?

    Either this meeting is about something else or Ford are going back on their word. If it is the latter, then it has an eerie parallel to when Ford shut car manufacturing down in Dagenham after promising the UK unions that they would get a contract to build the next Fiesta…

    http://www.inautonews.com/ford-prepares-genk-plant-for-the-new-mondeo

  • avatar
    acuraandy

    In 2006 Ford announced officially (despite rumors for the preceeding 5 years) it would be shuttering the Twin Cities Assembly Plant in St. Paul, MN, the plant that built the much antiquated Ford Ranger.

    It didn’t actually close until around Christmas 2011.

    These things take time…

    • 0 avatar
      tresmonos

      When they announced Twin Cities, STAP, Wixom, Atlanta, Edison (earlier), St. Thomas (announced later) and Norfolk, they did it exactly to capacity and end of platform life.

      The Ranger limped along as there was already minimal product development that was underway that kept the platform somewhat relevant.

      Genk will see the same fate as the end of the platform life plants did. No reinvestment, and no VIN roll.

      I guess I’m trying to illustrate some plants have been shuttered within a year’s time the plant had a sister assembly plant running the same product.

  • avatar
    chicagoland

    “…what would it cost to reactivate the plant?”

    Flexible manufacturing can add capacity to other sites. The days of ‘dedicated car platform’ factories are over.


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