Ford to inject up to $4.76 billion into its German business

[Harley Lover]

Well, for those who have expressed the opinion that Ford Europe is on its last legs, this news seems to indicate that Ford have different ideas: 

Quote

Ford Motor Co. said it will inject up to 4.4 billion euros ($4.76 billion) into its German unit as it tries to revive its car business in Europe.

The German arm, Ford-Werke, will continue its strategic transformation initiatives, focusing on reducing costs in Europe and increasing competitiveness, Ford said in a statement, after the Financial Times first reported the news.

 

“By recapitalizing our German operations, we are supporting the transformation of our business in Europe and strengthening our ability to compete with a fresh product portfolio,” Ford Vice Chair John Lawler said in the statement.

“To build a sustainable business in Europe, we also need to continue to simplify our governance, reduce costs, and drive efficiencies.” He called on policymakers in Europe to come up with a clear agenda to promote the uptake of electric vehicles and bring emissions targets in line with consumer demand.

 

The new funding commitment includes a capital injection to address overborrowing at Ford-Werke and provide funding for a multi-year business plan.

 

https://www.autonews.com/ford/an-ford-europe-infusion-0310/?utm_source=Sailthru&utm_medium=email&utm_campaign=Newsletter-ANDaily-20250310

[bzcat]

The money will just plug the hole dug by the losses from the last couple of years. Not enough to invest in new products.

 

Ford has no future passenger car product strategy for Europe. Focus is ending production this year and Kuga next year. After that, Ford Europe will only sell Puma and MEB Explorer/Capri plus imported Mustang. That's not sustainable. Whatever Farley has in mind, he needs to commit to it soon. 

[rmc523]

Don't cancel most of your core product in the region.

 

 

 

I'll take $5 million now for my consulting fee.

Edited March 10 by rmc523

[akirby]

1 hour ago, rmc523 said:

Don't cancel most of your core product in the region.

What if you can’t make money on your core product?

Edited March 10 by akirby

[passis]

Farley secured a similar investment in Brazil a few years ago. The money was used to close its production operations all together, covering taxes and labour costs. I have little hope for their factories in Germany, unfortunately.

[jpd80]

They either recapitalise the existing debt or watch their operation go bankrupt.

And that’s before Ford does anything about the vehicles it’s trying to sell.
 

 

Quote

https://www.reuters.com/business/autos-transportation/ford-inject-up-476-billion-into-german-business-ft-reports-2025-03-10/

FRANKFURT, March 10 (Reuters) - Ford (F.N), opens new tab will inject up to 4.4 billion euros ($4.8 billion) into its struggling German operations as it tries to revive its European business, the U.S. carmaker said on Monday.

Its Ford-Werke German arm, which is burdened with 5.8 billion euros of debt, will continue a strategic transformation, focusing on reducing costs and increasing competitiveness, Ford said in a statement.

The move comes as Europe's car sector is battling high costs, weak demand and rising competition from Asian rivals, forcing plant closures and job cuts at a time when the United States is considering tariffs on auto imports.

 

Ford is already cutting thousands of jobs in Europe, many of them in Germany, where domestic giant Volkswagen (VOWG_p.DE), opens new tab has also been struggling.

"By recapitalising our German operations, we are supporting the transformation of our business in Europe and strengthening our ability to compete with a fresh product portfolio," said John Lawler, vice chair of Ford Motor Company.

"To build a sustainable business in Europe, we also need to continue to simplify our governance, reduce costs and drive efficiencies."

 

 

[rmc523]

16 hours ago, akirby said:

What if you can’t make money on your core product?

 

Fix the product to make it better/more profitable?

[akirby]

11 minutes ago, rmc523 said:

 

Fix the product to make it better/more profitable?

Not a product issue per se it’s infrastructure and overhead and poor management.

[rmc523]

7 minutes ago, akirby said:

Not a product issue per se it’s infrastructure and overhead and poor management.

 

It's not worth going back and forth, as the topic has been beaten to death in all sorts of threads.

 

Ford will eventually run out of product to cut, all while competitors manage to make money on the same vehicles.

 

It'd just be nice to see Ford have some sort of expansion strategy rather than constantly cutting to profitability (yes, I know certain models have been dropped for others blah blah blah).

 

Them being in a product lull after switching plans multiple times doesn't help things.

[akirby]

3 hours ago, rmc523 said:

 

It's not worth going back and forth, as the topic has been beaten to death in all sorts of threads.

 

Ford will eventually run out of product to cut, all while competitors manage to make money on the same vehicles.

 

It'd just be nice to see Ford have some sort of expansion strategy rather than constantly cutting to profitability (yes, I know certain models have been dropped for others blah blah blah).

 

Them being in a product lull after switching plans multiple times doesn't help things.

It is frustrating.  But I’m afraid they would have to clean house and start from scratch to be cost competitive and develop entirely new smaller cars and crossovers for Europe (that wouldn’t sell here).  It would be massively expensive.  Some of that could be done with new EVs but the commercial side is doing great.

[grbeck]

2 hours ago, akirby said:

It is frustrating.  But I’m afraid they would have to clean house and start from scratch to be cost competitive and develop entirely new smaller cars and crossovers for Europe (that wouldn’t sell here).  It would be massively expensive.  Some of that could be done with new EVs but the commercial side is doing great.

 

Even if Ford does clean house and start from scratch...will it be worth the effort? The European market is largely stagnant. Several European countries are experiencing a decline in population, and the population is aging. Those conditions aren't exactly conducive to future sales growth.

 

Honda, for example, has essentially packed up and left. Even VW is in trouble. 

[mackinaw]

8 minutes ago, grbeck said:

 

Even if Ford does clean house and start from scratch...will it be worth the effort? The European market is largely stagnant. Several European countries are experiencing a decline in population, and the population is aging. Those conditions aren't exactly conducive to future sales growth.

 

Honda, for example, has essentially packed up and left. Even VW is in trouble. 

 

I didn't know this, but Ford's European operations has 9 billion dollars of debt.  And this 4.76 billion care package replaces a previous 2006 agreement that said Ford would cover any losses of its German subsidiary.  Pretty much for Europe, it's sink or swim now.  

 

Worth listening to today's Autoline Daily.  Go to the 3:55 mark.

 

https://www.autoline.tv/daily/ad-4009-nissan-promotes-product-guy-to-ceo-xpeng-investing-billions-into-humanoid-robots-mclaren-merger-expected-soon/

[Joe771476]

On 3/10/2025 at 6:49 AM, Harley Lover said:

Well, for those who have expressed the opinion that Ford Europe is on its last legs, this news seems to indicate that Ford have different ideas: 

 

https://www.autonews.com/ford/an-ford-europe-infusion-0310/?utm_source=Sailthru&utm_medium=email&utm_campaign=Newsletter-ANDaily-20250310

Another mistake!

[SoonerLS]

On 3/10/2025 at 3:14 PM, akirby said:

What if you can’t make money on your core product?

Make it up in volume. 

[jpd80]

12 hours ago, akirby said:

It is frustrating.  But I’m afraid they would have to clean house and start from scratch to be cost competitive and develop entirely new smaller cars and crossovers for Europe (that wouldn’t sell here).  It would be massively expensive.  Some of that could be done with new EVs but the commercial side is doing great.

The other issue is that Ford Europe also supplies ROW markets, the supply of those vehicles has been drying up.

As an alternative, it would be great if Ford could expand its Chinese production to cover south east Asia and Australia.

Heck, even Bronco Sport and Maverick exports from Mexico would help…..

[mackinaw]

This keeps getting better and better.  The German auto workers union accuses Ford of a "dirty trick."

 

https://www.detroitnews.com/story/business/autos/ford/2025/03/11/ford-germany-ig-metall-protests-reorganization/82281942007/

[bzcat]

23 hours ago, mackinaw said:

 

I didn't know this, but Ford's European operations has 9 billion dollars of debt.  And this 4.76 billion care package replaces a previous 2006 agreement that said Ford would cover any losses of its German subsidiary.  Pretty much for Europe, it's sink or swim now.  

 

Worth listening to today's Autoline Daily.  Go to the 3:55 mark.

 

https://www.autoline.tv/daily/ad-4009-nissan-promotes-product-guy-to-ceo-xpeng-investing-billions-into-humanoid-robots-mclaren-merger-expected-soon/

 

I mentioned this in the first reply. This $4.76 billion transfer is not an investment but backfilling the negative capital account of Ford Europe which has to be done to avoid tax penalties. Ford is not investing in Europe, in fact quite the opposite. There is no new product coming after Focus and Kuga are done. 

[jpd80]

3 hours ago, bzcat said:

 

I mentioned this in the first reply. This $4.76 billion transfer is not an investment but backfilling the negative capital account of Ford Europe which has to be done to avoid tax penalties. Ford is not investing in Europe, in fact quite the opposite. There is no new product coming after Focus and Kuga are done. 

This.

Dearborn is at a bit of a loss as to what to do with Ford Europe and apart from the continuing BEVs and Transit vans, I think they’re waiting for CE1 variants in a few years to replace the VW based Explorer and Capri.

 

The only up side here is that VW looks to be in even bigger hole needing must do affordable BEVs to survive 

[AGR]

7 hours ago, bzcat said:

 

I mentioned this in the first reply. This $4.76 billion transfer is not an investment but backfilling the negative capital account of Ford Europe which has to be done to avoid tax penalties. Ford is not investing in Europe, in fact quite the opposite. There is no new product coming after Focus and Kuga are done. 

So, you're privy to Ford's European plans? I would bet that they're getting CE1 vehicles, including ones we won't get in North America. Valencia is being converted to build EVs, Koln is already converted. 

[jpd80]

On 3/13/2025 at 1:35 PM, AGR said:

So, you're privy to Ford's European plans? I would bet that they're getting CE1 vehicles, including ones we won't get in North America. Valencia is being converted to build EVs, Koln is already converted. 

And this is why Farley basically had Dearborn take direct control of European operation,

the previous heads have run up so much debt that the BU only survives on Transit sales.

While the commercial business is still strong, the retail / passenger vehicle side is in trouble.

 

Leveraging vehicles that are being developed in USA and Chinese operations would seem

to be the most cost effectuive solution here as well as CE1 vehicles and modules for Europe.

 

Strange how Ford seems to be at its best when fighting for survival…..

Edited March 15 by jpd80

[akirby]

2 hours ago, jpd80 said:

And this is why Farley basically had Dearborn take direct control of European operation,

the previous heads have run up so much debt that the BU only survives on Transit sales.

While the commercial business is still strong, the retail / passenger vehicle side is in trouble.

 

Leveraging vehicles that are being developed in USA and Chinese operations would seem

to be the most cost effectuive solution here as well as CE1 vehicles and modules for Europe.

 

Strange how Ford seems to be at its best when fighting for survival…..

To this point they’ve been unwiling to do what’s needed in Europe.  It was so mismanaged for 20+ years……

[jpd80]

On 3/16/2025 at 10:17 AM, akirby said:

To this point they’ve been unwiling to do what’s needed in Europe.  It was so mismanaged for 20+ years……

Ford Europe’s management fell into the trap of staying just ahead of ever tightening emissions regs

and you are so right, this has been coming for a long time. A lot of it was home room tribalism where

any changes requested by other areas was met with scorn and flat out refusal.

 

 

[bzcat]

On 3/15/2025 at 5:17 PM, akirby said:

To this point they’ve been unwiling to do what’s needed in Europe.  It was so mismanaged for 20+ years……

 

It's not mismanaged per se. It's just very difficult to turn an accounting profit as an US company operating in Europe because of the accounting rules on pension costs is different for US companies vs. the rest of the world. Pension (both Govt mandated or private) and other defined benefits plans are still very common in Europe where there is no 401K like savings plan.

 

I'm a bit skeptical that Ford will commit to building CE1 in Europe. There is spare capacity to build it in North America - Mexico and Canada has free trade agreement with EU which is why Ford was going to build GE2 there instead of US. And Ford hasn't said a peep about what it is doing in India... they are restarting production there but only for export - the obvious destination is EU.

[mackinaw]

6 minutes ago, bzcat said:

It's not mismanaged per se. It's just very difficult to turn an accounting profit as an US company operating in Europe because of the accounting rules on pension costs is different for US companies vs. the rest of the world. Pension (both Govt mandated or private) and other defined benefits plans are still very common in Europe where there is no 401K like savings plan.

 

This is one of those "a long time ago" stories, but back in the 80's when Ford NA was hemorrhaging money, it was Ford Europe that bailed them out.

[bzcat]

21 minutes ago, mackinaw said:

 

This is one of those "a long time ago" stories, but back in the 80's when Ford NA was hemorrhaging money, it was Ford Europe that bailed them out.

 

Correct. For a while Ford Europe was generating all the profit and cash that propped up the rest of the company. But back then, the pension reporting rules were the same for US companies as the rest of the world. I don't want to turn this into an accounting discussion but the entire world reports pension expense when the pension is paid. For US companies, they have to accrued pension expense when it is earned, and they have to set aside cash reserves to pay for the pension. This has been the case since the US accounting rules were changed in 1987. This means US companies (especially ones that employs a lot of highly skilled people for a long time like Boeing, Ford, GM, GE etc) are saddled with a lot of extra expenses and is required to restrict a lot of cash that their foreign competitors don't need to worry about. 

 

Even when foreign companies have the same exact location and pension obligation, the operating results are quite different. We saw a clear example of this when 1 year after GM sold Opel to PSA, it made a huge profit. A lot of people use that as an example on how GM "mismanaged" Opel. It was none of that. The only difference is PSA didn't need to accrue pension expenses and is not required to set aside cash to pay for those pension. 

 

Another example... for a few year FCA and subsequently Stellantis reported huge earnings from US operations. People reflectively point to Jeep and Dodge as cash cows. But really, the reason they were profitable is because the former Chrysler part of the company no longer reported results on US GAAP -  the pension expenses disappeared overnight making Jeep appear very profitable. But the reality is all the products were aging and they needed replacements so the profits were really a short term benefits of accounting rule change going from US GAAP to IFRS.

Edited March 17 by bzcat