FRANKFURT: Ford and Jaguar Land Rover (JLR) unveiled sweeping job cuts across Europe on Thursday as carmakers struggle with a slump in demand for diesel vehicles, tougher emissions rules and a global economic slowdown led by China.
Tata-owned JLR, based in central England, said it will cut 4,500 out of 42,500 jobs, while Ford said it will slash “thousands” of jobs as part of an overhaul that could result in plant closures and the discontinuation of some models.
A trade war between China and the United States combined with Britain’s pending exit from the European Union has fragmented once global markets, forcing carmakers to reassess the profitability of individual models and locations.
In recent quarters, JLR and Ford’s profits have lagged behind those of peers BMW, Volkswagen, and Peugeot, ramping up investor pressure on managers to stem losses.
“We are taking decisive action to transform the Ford business in Europe,” Steven Armstrong, group vice president, Europe, Middle East, and Africa, said in a statement on Thursday.
Ford Europe, which employs 53,000 people, has been losing money for years and pressure to restructure its operations has increased since arch-rival General Motors G.M raised profits by selling its European Opel and Vauxhall brands to France’s Peugeot SAC.
JLR said demand in China, once one of its strongest countries, fell 21.6 percent in 2018, the biggest drop of any of its markets.
“The economic slowdown in China along with ongoing trade tensions is continuing to influence consumer confidence,” said Jaguar Land Rover Chief Commercial Officer Felix Brautigam.
The job cuts come as Ford and JLR have been hit by a fall in demand for diesel-engined cars and after European policymakers last month agreed stricter pollution limits, forcing carmakers to accelerate investments to make electric cars.
“We believe Ford Europe could require as much as a 20 to 30 percent reduction of capacity and headcount,” Morgan Stanley analyst Adam Jonas said in a note on Thursday.
Ford said it will seek to exit the family vans or MPV segment, review its operations in Russia, and combine the headquarters of Ford UK and Ford Credit to a site in Dunton, Essex to achieve a 6 percent operating margin in Europe.
“We want to be a net contributor of capital and not a net detractor,” Armstrong told journalists on a later call, referring to Europe’s financial contribution to US parent Ford Motor.
Ford Europe reported a €245-million ($282-million) loss before interest and taxes in the third quarter, equivalent to a negative 3.3 percent EBIT margin.