Ford Europe Unit to Post 2002 Profit
Cologne, Germany, Dec. 4 (Bloomberg) -- Ford Motor Co.'s European unit expects to post a full-year profit this year, helped by cost cuts, market share gains and improved productivity at its four car assembly plants, executives said.
The Cologne, Germany-based business will have a ``solid'' profit in 2002, said Ford Europe President Martin Leach. It has trimmed $1.6 billion in costs since 2000, and its market share rose to 8.8 percent this year from 8.6 percent last year.
``The trend is very favorable,'' Leach said in an interview.
The recovery in Europe contrasts with Ford's North American business, which is struggling to boost sales as it cuts jobs and closes plants to recover from last year's loss of $5.45 billion worldwide. Ford said yesterday its U.S. November sales fell 20 percent.
In Europe, where it makes Fiesta, Focus and Mondeo cars, it closed or sold five assembly plants since 2000, when it introduced a reorganization plan after a loss of $1.1 billion. It shut its Dagenham, England, car plant, cutting about 2,000 jobs.
The closures were part of a three-year program developed by Nick Scheele, then Ford Europe chairman, and David Thursfield, then Ford Europe president. Both have moved to the world's No. 2 automaker's Dearborn, Michigan, headquarters, where Scheele is chief operating officer and Thursfield is executive vice president in charge of international operations. He also is chairman of Ford Europe.
They're using a similar plan in North America to recover from last year's loss and generate $7 billion in pretax profits by 2005.
In Europe, Ford's four remaining car plants will be operating at 100 percent of their capacity next year, said John Fleming, vice president of manufacturing in Europe. That compares with about 75 percent in 1999.
It invested $530 million to upgrade its 4,000-worker Cologne assembly plant to produce the Fiesta starting last year and to give the factory flexibility to produce three different models and to increase productivity.
``We are going to replicate this throughout the system,'' said Fleming. ``The Cologne plant is our future vision of what flexible and lean manufacturing should look like.''
The Fiesta introduction was the unit's most successful ever, with a 20 percent improvement in customer satisfaction versus the previous Fiesta, a 25 percent reduction in worker injuries and fewer lost production days as it changed over to making the new model from the old, executives said.
The latest Fiesta is one of 45 new or upgraded models the company is introducing by 2004 in Europe. It requires 16 hours of assembly time, compared with 20 hours for the previous model. It has 1,800 parts from 140 suppliers, half as many as the earlier car. Twelve suppliers, including instrument panel maker Textron Inc. and door maker Faurecia SA, assemble cluster of parts at plants adjacent Ford's factory and ship them to the assembly line via conveyor lines.
Ford Europe has 650 people working on reducing its $10 billion in parts and manufacturing costs. They review design, material and testing techniques to cut waste and complexity, said Paul Stokes, vice president of purchasing.
They've figured out how to reduce the number of blue-oval Ford badges used on wheels and trunk lids from 16 to three and scrapped a process that painted stainless steel exhaust pipes, he said.
``It's relentless attention to detail'' while ``not trying to take quality out of the vehicle,'' Stokes said. He said he didn't yet know how large the savings will be, though that some price reductions were as high as 53 percent.
Leach said that the company's goal is to trim costs in Europe by $1.5 billion between 2003 and 2005.
Those reductions are important because European car sales are declining and rivals are ``dramatically'' increasing spending on marketing programs, such as discounts and low-rate financing, he said. ``We've been able to resist that,'' he said.
The goal for next year is to continue to achieve cost reductions, boost factory efficiency and increase market share to at least 9 percent, he said.
``We want to keep this going,'' Leach said.