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Ford will inject up to €4.4bn of new capital to keep its debt-ridden German subsidiary afloat as the US group warned of more “tough decisions” ahead as it tries to revive its flagging car business in Europe.
In an interview, vice-chair John Lawler said Ford would not pull out of its European business but called on Brussels and Germany to do more to accelerate the transition to electric vehicles and lower costs to compete against Chinese rivals.
“I don’t think we should be defeatist,” Lawler told the Financial Times. “We should set a path and figure out how we’re going to make this viable, and that’s what we’re intending to do.”
With the recapitalisation, Ford said it would also end a commitment in place since 2006 to shoulder any losses its subsidiary Ford-Werke made.
Instead, it will commit hundreds of millions of euros over the next four years to strengthen the subsidiary, which has more than €5bn in debt, according to the company.
When asked whether Ford could walk away from its German subsidiary if losses continued to mount, Lawler said: “I don’t think any subsidiary is left on its own . . . We need to continue to work on cost reductions.”
Ford has struggled to generate profits in Europe and has reduced the number of vehicles in its line-up to focus on its van business and more profitable areas of the highly competitive market.
In November, Ford said it planned to cut about 4,000 jobs in Europe — including 2,900 in Germany — and reduce production of its Explorer, an electric sport utility vehicle, and its electric Capri — that are both built in Germany. The company has invested $2bn to transform its Cologne plant to produce EVs.
Globally, the group lost $5bn from its EV business last year and does not expect to break even until closer to the end of the decade after it launches a new vehicle platform in 2027 that will cut the costs of EV production.
Lawler said the electric transition “just hasn’t moved as quickly as everybody expected” and added: “It’s going to require tough decisions . . . and we’re going to have to work together.”
Last week, Brussels announced that it would ease stricter emissions rules on petrol cars, allowing the embattled auto industry to avoid hefty fines until 2027.
But Lawler, who was chief financial officer until last year, urged more incentives following a collapse in sales of electric cars in big European markets such as Germany and France after governments suddenly pulled back or reduced subsidies for EV purchases.
“We all have plenty of supply of EVs into the marketplace. It’s a demand issue,” said Lawler, who was also recently appointed to the board of European car industry body ACEA. “We have to start attacking the root cause.”
