Ford Shows How Expensive It Is To Close a Plant In Europe
Popular wisdom in the car business is that it’s impossible to close underutilized assembly plants in Europe. Dozens of plants were closed in the U.S. over the past 10 years, and though the capacity reductions were no doubt painful for the workers previously employed at those shuttered plants, not to mention the communities around them that those workers lived in and bought things in, they did right-size the U.S. auto industry’s production footprint for the market share for the Detroit 3. The day of reckoning in Europe has eluded them so far, but it’s coming.
Ford announced back in October 2012 that it would be closing three plants in Europe in an effort to trim capacity there by 18 percent. The plants to close were two in Britain and Ford’s Genk, Belgium plant.
Today, in a regulatory filing, Ford announced that it had reached an agreement with the Genk plant’s 4,000 hourly workers on a severance deal. Under the terms of the agreement, the company would incur a one-time severance charge of $750 million. Pulling out your handy calculator if you’re not mathematically inclined, and you’ll see that Ford is coughing up an average of $187,500 per worker. Presumably, not all workers would receive that much (depending upon tenure, position, etc., some may get more, some less)
That’s a ton of money, and tops the $140,000 that GM offered to its U.S. hourly workforce in 2008 (if they had worked for the company for 10 years and agreed to give up their pension and retiree health benefits). But it’s less than GM paid to close its plant in Belgium, which cost GM $527 million to shed 2,600 workers. GM’s average payout to close its Antwerp plant in 2010 comes to $202,700 per worker.
Ford’s Genk plant currently builds the Mondeo sedan, and the S-Max and Galaxy minivans. After the closure of the Genk plant, its products will move to Ford’s Valencia, Spain facility. I’m sure the Spanish government is breathing a sigh of relief that Valencia wasn’t closed (and presumably is more secure now that it’s getting work moved from another plant). Spain really could not handle any more bad employment news; its unemployment rate currently stands at a staggering 26.6 percent.
The closure of Genk is bad news for Belgium’s car industry. In 2005, total Belgium auto production was 926,000 units. By 2010, that had shrunk to just 338,000 units, which placed it 26th globally. Two of Belgium’s four assembly plants will have closed by next year (GM’s Antwerp, Ford’s Genk), leaving just Audi’s Brussels plant and Volvo’s Ghent plant standing.
