Breaking Up Is Expensive To Do, Ford Finds Out
According to lore, it is impossible to close a factory in Europe. Not true. It’s just outrageously expensive. One company that found out is Ford. The carmaker allocated nearly $200,000 per hourly worker of its soon to be closed Genk plant in Belgium.
Ford expects to pay about $750 million in severance to hourly workers when it will close its factory in Genk, Belgium, by the end of 2014, says Reuters after reading regulatory filings.
The plant employs about 4,000 hourly workers and 300 salaried employees. Negotiations with salaried workers at the plant are still under way.
In most European jurisdictions, workers have a job for life after an initial probationary period. This does not mean you can’t fire them. If you do, they are entitled to a hefty severance, decided by a court, or in negotiations with the unions. Average severance payments of $200,000 and higher are normal, depending on the age of the workforce.
When the auto task force or whatever it was thought it was close to being able to not take GM and Chryco into BK (through new UAW contract and renegotiated bonds, etc. Ford stepped in and re-did a deal with them that set the bar at a point that it essentially guarenteed BK was the only way, have read a few books, task force wasn't happy with Ford). Ford is using the same tactic in europe, they are setting a bar that PSA, Fiat and Opel will have to follow and they are setting it as high as they can.
Are there any creative ways to offload a plant on a separate company? For example, Ford could create a separate contract manufacturer to run the Genk plant and sell cars to Ford. Ford pays for them to take take the plant. After a couple of years Ford quits buying cars built in this plant and the contract manufacturer goes out of business, liquidating its assets to partly cover its liabilities. Workers can sue, but good luck getting blood out of a turnip. After the property takes a bath to get rid of worker claims, the land and building increase in value.
@European, Geeber and the rest of the interested parties. What is different about this global recession, which is why this article is written. Commodity prices have remained high. What the West isn't using is bought up by the developing economies, thus, maintaining high commodity prices. Also trade of these developing economies is 50% of global trade. 20-30 years ago it was less than 20%. Also, these new economies are being structured to operate with high commodity prices. We aren't able to match them and restructure to operate with these new prices quick enough. In all previous global recessions all the central banks and governments increased inflation to get growth. This is very awkward at the moment because of the strength of the developing economies. We have to compete more fairly now, protectionism isn't going to work unless we develop a system similar to the old Soviet era and placing an embargo on all developing economies. The US with its current "energy boom" will take some of the heat off of the US, but it will not be like it was in the "good old days". The Europeans will fair worse. The US will gradually lose control of dictating commodity prices as the Chinese and others buy more and more. This wil also cause greater swings in USD valuations and interest rates down the track. That is why I say the US has to come on board with the rest of the globe, if it doesn't it will slowly sink. You can see gradual changes in the US already. Survial is the name of the game.
Politicians who propose to take (or borrow) from Peter to pay Paul will receive hearty approval from Paul. Free donuts--while they last! Which won't be forever, as Greece is learning. And there is a more important and indisputable reason the self-indulgence won't last: Europe is committing demographic suicide. (Japan is even further along.) They aren't having enough babies to keep the machine running. It is the people 20 to 55 who produce goods and services, form families and provide the next generation, and launch new ideas and enterprises. Now it's too late to reverse the process. Well, except by importing tens of millions of Haitians, Algerians, Pakistanis, Indonesians, Sudanese, etc. But that new and very different society wouldn't be culturally French, Italian, Austrian, etc., will it?