Ford Stalls Out in Europe

Marco Werman: President Obama said he saved the auto industry with bailouts when tens of thousands of American jobs were on the line. His opponent, Mitt Romney, doesn’t agree and says he wanted to deal with Detroit through managed bankruptcy. Whatever the rhetoric, there’s a reminder today that US automakers are still struggling. Ford, the one American car maker that did not get bailed out by the government, is shutting down some plants in Europe. The closings in Belgium and Britain will mean the loss of thousands of jobs in those countries by 2014. The BBC’s Jorn Madslien says the European economic crisis has hit the auto industry hard.

Jorn Madslien: There’s been a massive slump in car sales in Europe this year. It’s been particularly bad for the manufacturers that are operating in the mid-segment, so Ford, alongside with the French and the Italians who don’t have export markets and also the General Motors subsidiaries Opel and Vauxhall.

Werman: And the reason behind this can all be traced to Europe’s economic crisis? There’s just not enough expendable income for people to buy cars?

Madslien: The are two reasons. One of them is that the overall market is down, but the second reason is that the companies that are doing the best within this shrinking market are either those appealing to people of tight budgets, so the Koreans are doing very well, or the other people who are appealing to those people who still have money, and there are still quite a lot of money even in a tough economy.

Werman: Recent reports have said that Ford’s Belgian production is moving to Spain and their UK production may be headed to Turkey. What might these countries be able to offer that the UK and Belgium can’t?

Madslien: I don’t think Ford’s plans should be seen as a reflection of the different values of the workforces in different countries. It’s just a matter of every factory they own in Europe has spare capacity, so you close down one and you move the production from that to take up the slack in another. So it’s not really that Spain or Turkey offer anything that Belgium or Britain couldn’t offer, it’s more that they just need to make some choices of which operations to continue with.

Werman: In the past in Europe, plant closings have been met with protests. Do you expect the same with these closings?

Madslien: During summer, when Peugeot CitroÃ? «n announced eight thousand job cuts and the closure of one factory, the French Union said it was a declaration of war. The response to Ford’s closures has been milder in the UK. The unions have merely called it “a betrayal”, so industrial action and the sort of anger that you’ve seen in France is unlikely to be seen in the UK, or indeed in Belgium.

Werman: Finally, Jorn, when was the last time you bought a new car?

Madslien: About three weeks ago.

Werman: Wow.

Madslien: It’s a funny situation, but the car-makers are offering quite deep discounts because of the market conditions, so for many consumers it might be a good time to buy. And there is an additional factor here. New cars have so good fuel economy compared with old cars and fuel prices in Europe have become so high, so replacing an old car with a new car could be very good economics in a markets when the manufacturers are offering deep discounts because of the crisis.

Werman: Now, we’re not going to get and kickback for this, but I don’t want you to see it as an endorsement, what kind of car was it?

Madslien: The car I bought was a Volkswagen Touran, but I have several cars. I’m a bit of a car guy, so it just added to the stable.

Werman: Well, that’s why he covers the auto industry for the BBC. Jorn Madslien, thank you so much.

Madslien: My pleasure.