October 24, 2012 / 4:38 AM / 5 years ago

Ford to close Belgian plant by end-2014

6 Min Read

Workers at a Ford assembly plant react after an emergency meeting with the plant management in Genk October 24, 2012. Ford Motor Co announced to unions on Wednesday that it will close the factory employing 4,300 workers in the Belgian town of Genk, as it tries to stem losses in Europe and match capacity to tumbling demand.Francois Lenoir

GENK, Belgium/MADRID (Reuters) - Ford Motor Co will close a Belgian factory employing 4,300 workers by the end of 2014, shifting production to Spain as the U.S. automaker tries to save money and stem European losses.

Europe's car market has slumped because the regional debt crisis has led to spending cuts and high unemployment, hurting consumer budgets.

Automakers are battling for survival, cutting production to match demand. This means factories, including the Ford plants in Genk and Valencia, have not been running at full capacity. Moving production to one place should allow Ford make savings.

Wage costs are also cheaper in Spain than in Belgium.

"The proposed restructuring of our European manufacturing operations is a fundamental part of our plan to strengthen Ford's business in Europe and to return to profitable growth," Ford Europe Chairman Stephen Odell said in a statement.

Ford management will also meet British unions on Thursday, a spokesman said. He declined to comment on media reports that Ford could also close its plant in Southampton where it makes its Transit van and employs just over 500 people.

The Genk plant makes the Mondeo mid-size car and Galaxy and S-MAX minivans, but the models are nearing the end of their life cycles. Ford said production of the next models would move to Valencia with the loss of 4,300 jobs by the end of 2014.

In turn, production of the C-MAX and Grand C-MAX compact multi-purpose vehicles could move from Valencia to Saarlouis, Germany, in 2014 under the proposed plan, it said.

Ford has about 6,000 workers in Spain, including 3,485 in Valencia. It did not say whether jobs would be created but any would be welcome in the region, one of Spain's most indebted with 26.3 unemployment.

Unions in Spain said no wage agreement was yet in place but analyst said overall hourly labor costs are as much as 75 percent higher in Belgium than in Spain. The regional government said no tax incentives had been offered in the deal.

Rough Scenes

Several hundred Ford workers gathered outside the gates of the plant, as local managers met staff representatives on Wednesday morning. They were angry and surprised by the news.

"It's incredible," said one of the workers, Peter Aerts. "Just last month I got an invitation to celebrate 25 years working here."

Union leader Luc Prenen said European-level managers did not attend the meeting, leaving local bosses to read a statement.

"After the announcement there were some rough scenes. There was some pushing and shoving but we managed to calm it down," said Prenen, the head of the ACV union.

"It was aimed at the management but they left quickly. It was also among each other as people were very angry and frustrated."

Belgium is no stranger to factory closures in the auto sector. General Motors shuttered its Opel Antwerp plant in 2010 and French carmaker Renault was slammed for its controversial decision to close its Vilvoorde plant on the outskirts of Brussels in 1997.

The shift to Spain also follows GM's May decision to produce the next generation of its Astra compact car in Britain, after workers agreed a pay deal, leaving its plant in Bochum, Germany in danger of closure.

Ford Europe managers, including Odell, were scheduled to meet Belgian Prime Minister Elio di Rupo and Employment Minister Monica De Coninck at 1 p.m. (1100 GMT), after a separate meeting with members of the government of the Dutch-speaking region of Flanders, where the plant is located.

Union leaders said they would boycott a meeting with Ford Europe executives scheduled for 3 p.m. (1300 GMT) in Brussels as European executives had not made the announcement in person.

"(The closure) came as a surprise and is depressing news for 10,000 people employed directly and indirectly. It's an unbelievable blow for the province of Limburg and for Belgium. It's a black day," Rohnny Champagne, provincial chairman of the ABVV-Metaal union, told Reuters by telephone.

In September, European new car registrations shrank at the fastest pace in the past 12 months, leaving nearly all major brands nursing double-digit declines.

French carmaker PSA Peugeot Citroen, which in July announced plans to cut 8,000 more jobs and close a plant near Paris, said on Wednesday third-quarter sales fell 3.9 percent.

The Genk plant, which opened in 1964, has operated on a four-day week for much of 2012, unions say, with only 15 more production days planned this year, none of them in December.

In a recent research note, New York-based UBS analyst Colin Langan predicted that Ford would move to close a major plant in Europe, where its factories are running at 52 percent of maximum output on average this year, with Genk the likely candidate.

Closing the factory would cost an estimated $1.1 billion and generate annual savings of $730 million, Langan added.

Ford's announcement last month that it would produce the new Mondeo in Genk from next year briefly raised hopes for the plant's future, although sources later warned that the tentative start date was not a reprieve and Ford was prepared to assemble the model elsewhere.

Ford, which will present third-quarter results on October 30, doubled its European loss forecast for 2012 to $1 billion in July and said action was needed to "decrease our production to match real demand".

Additional Reporting by Philip Blenkinsop in Brussels; Writing by Helen Massy-Beresford; Editing by Anna Willard

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