Ford cuts jobs to sustain European profits as GM lags

February 3, 2016 09:46 AM

Ford revealed plans on Wednesday to cut hundreds of white-collar jobs in Europe and revamp its model range to keep it profitable in the region after turning a corner in 2015.

Meanwhile rival General Motors, which announced another loss in Europe last year, vowed to break even at its own European arm.

Customers flocked to Ford and GM in Germany after VW's credibility and image were hit by a regulatory scandal, registration figures showed.

Along with Italian carmaker Fiat, Ford and GM have made losses for years in Europe, which in 2014 recovered from a six-year downturn during which demand dropped to a two-decade low.

Despite posting a full-year profit of $259 million in Europe in 2015, its first since 2011, Ford said on Wednesday it plans to cut hundreds of white-collar jobs in the region with a voluntary redundancy scheme.

The U.S. firm, whose improved performance was helped by a 10% gain in sales, said job cuts and a model overhaul were needed to ensure profits were sustainable.

"We want to make sure we have that stable footing so we can build a viable business in the future," Jim Farley, head of Ford Europe told Reuters, citing a longer-term operating margin target of 6-8%.

This compared with less than 1% it hit last year.

Separately, General Motors said it had pared losses at its European operations by 25% and GM Europe's full-year operating loss was cut by more than 40% to $0.8 billion in 2015, compared to $1.4 billion in 2014.

GM Europe reported an adjusted loss before interest and taxes of $0.3 billion in the fourth quarter of 2015, compared with $0.4 billion in the year-earlier period.

GM's Chief Financial Officer Chuck Stevens described breaking even in Europe this year as "a company-wide focus."

He said GM has already taken restructuring actions, and now had "the right cost structure.”

Analysts say that while demand has recovered, profitability is destined to stay low in Europe as cut-throat competition, over-capacity, high structural costs and regulatory demands eat into margins.

Among Europe's volume carmakers, Fiat Chrysler appears most bullish. Last week FCA raised its expectations for EMEA in its business plan to 2018, forecasting adjusted operating profit margins to rise to above 4% by 2018 from the 1% it achieved last year.

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