Ford Pays a High Price for Plant Closing in Belgium (Published 2013) (2022)


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Belgian Town Braces for Ford Exit9 PhotosView Slide Show ›

Ilvy Njiokiktjien for The New York Times

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GENK, Belgium — Rumors of job cuts at the big Ford plant in this scruffy former coal mining town had been circulating for months. But on a clear morning a year ago, almost nobody in Genk expected what came next.

Worker representatives, summoned to a meeting room inside the factory, started tapping out text messages even before Ford executives had finished reading a terse statement. Ford had decided to shut down Genk for good. The factory, which employed 4,300 people, would produce its last car at the end of 2014.

The battle of Genk had begun. And the struggle would become a case study in just how difficult it can be for an automaker to cut its manufacturing capacity in Europe, even as the car market in this part of the world is the weakest in two decades.

Union stewards used megaphones to spread the grim news to workers on duty at the time of the announcement. Some people wept. Others barricaded factory gates, penning up about 6,000 newly built Mondeo cars, S-Max minivans and Galaxy vans that had already been promised to customers — creating a traffic jam that would effectively shut down production for months. The workers were not going to make things easy for Ford.

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“Now they had to talk,” recalled Jean Vranken, regional head of the ACV union that represents Ford workers in Genk.

Ford is one of the few companies to brave the fierce resistance of politicians and Europe’s powerful unions as it tries to emulate the brutal downsizing that carmakers in the United States have done — and that subsequently helped make possible the rebound now under way in the American car market.

But in Genk, a year after the announcement, the measure of calm that has returned has come at a high price for the company, its workers and the community. To be sure, Ford has succeeded in reaching a labor settlement that will allow it to close the factory, as scheduled, at the end of next year. The closure of Genk and two smaller factories in Britain will cut Ford’s capacity in Europe by 18 percent and, the company says, make it possible to return to profitability in Europe, compared with losses this year that have already reached $1 billion.

But the accord came only after a long, bitter struggle that cost Ford $750 million merely to settle with about 4,000 blue-collar workers in Genk, or about $190,000 per worker. And the total cost of Ford’s European overhaul is likely to end up much higher because of additional payments to white-collar workers in Genk and the expense of closing plants in Southampton and Dagenham in England. Ford has estimated the severance costs for all three plants at $1 billion.

That cost of layoffs is substantially higher than in the United States, where Ford set aside $374 million in 2009 to cover severance costs for 2,400 workers, or about $155,000 each. Moreover, European labor law is much more favorable to unions than in the United States and tends to support workers in their tradition of militancy. In Genk, workers prevented the plant from operating normally for more than four months and received unemployment benefits for some of the time they did so.

By some estimates, factories in Western and Eastern Europe are capable of producing seven million or eight million more cars and light trucks than the market can absorb. Many factories are operating at only 60 percent or less. That glut is the main reason that companies including Ford, Fiat, General Motors’ Opel unit and PSA Peugeot Citroën have already lost billions of euros in Europe in recent years.

“Ford did not take this decision lightly,” Stephen Odell, chief executive of Ford of Europe, said in a telephone interview Monday. “We understand that it affects people and their families.” But, he said, “we had to do it to positively influence the company going forward.”

Even though the auto industry has been much slower to close plants in Europe than in the United States, wary of the sort of struggle Ford has encountered, Ford is far from the only carmaker acutely aware of the excess capacity issue.

(Video) Ford Motor Company | Wikipedia audio article

“You need a plant to run at full capacity to be profitable in the volume segment,” said Pietro Boggia, a former Fiat executive who now works in the London office of Frost & Sullivan, a consulting firm. “If the current level of market demand does not improve dramatically, plant closings will have to continue, unfortunately.”

Yet for every factory that the industry might consider an albatross, there is a community that faces economic devastation if production shuts down. Nowhere is that more true than in Genk, at the eastern end of Belgium in the province of Limburg, the least prosperous region of the country’s Dutch-speaking north.

In Genk, a city of 65,000 people, many of them descendants of Italians, Turks or Moroccans who came decades ago to dig coal, an estimated 10,000 jobs will be lost at the end of next year when Ford closes the factory. That number includes not only Ford workers but also the businesses that depend on the plant, from big parts suppliers to the mom-and-pop shops.

Marianna Musolino, co-owner of a French fry restaurant in a neighborhood where many Ford workers live, said customers had begun scrimping on orders. “They didn’t take mayonnaise, which is rare, but it saved them 50 cents,” Ms. Musolino said. “Weird things like that.”

Another business already feeling the pain is Bewel, a nonprofit organization in the neighboring town of Diepenbeek that provides paid employment to mentally handicapped people. Until recently, Bewel operated a laundry that cleaned truckloads of protective clothing used by Ford.

But, realizing the work would soon dry up, Patrick Nelissen, managing director of Bewel, gave the Ford concession to a commercial laundry less dependent on Ford. That firm agreed to hire some of the handicapped workers.

Last week, Mr. Nelissen showed a visitor around a deserted building containing rows of idle commercial washers and driers. Stepping around a puddle, he wondered aloud how he was going to recover the 1 million euros, or $1.35 million, he had invested in machines shortly before Ford announced the shutdown. “Nobody needs this kind of machinery,” he said.

Mr. Nelissen said he understood Ford’s predicament. But the prevailing view in Genk is that Ford reneged on promises to build the next generation of Mondeos in the city. Residents knew there would be job cuts, but not a closing of the plant.

“A year ago they gave their word” that Genk would build the next Mondeo, said Wim Dries, the mayor. “Then they said, ‘The economy has changed. We have to close it.’ It was like a bomb going off.”

While Ford had indeed announced plans to build the new Mondeo in Genk, the company says it had also signaled that cost-cutting was imminent and all options were open. The shift to a new model was, from Ford’s point of view, a logical time to move production elsewhere. And Genk was among the European factories with the most excess capacity.

(Video) Ford | Wikipedia audio article

“We don’t believe we could have reacted any earlier,” Mr. Odell said.

In any case, Ford could not continue piling up the losses it has had in Europe. Even though Ford cut them by more than half in the most recent quarter compared with a year ago, to $228 million, the year’s running total was still more than $1 billion in losses for the first nine months. In 2012, Ford lost $1.8 billion in Europe for the full year.

Closing Genk will allow Ford to consolidate production at a factory in Valencia, Spain.

The relocation of some production to Spain has already created 1,300 new jobs in a region that is in far worse economic shape than the area around Genk, although Ford said labor costs in Valencia are not significantly lower.

As for the workers in Genk, the prospect of a jobless future is rapidly approaching. “You have to find something else, and quickly,” said Sandro Maurina, 36, a mechanic in the Ford plant who has worked there since he was 18. Like many in Genk, Mr. Maurina and his wife, Sabrina Gattanella, who have two young boys, are descendants of Italians who migrated to the region decades ago to work in the coal mines. But the last mine closed in the 1980s.

Mr. Maurina is studying nights to become a nurse. But union leaders and local officials say they worry that many Ford workers are still in shock, and unsure what to do in December 2014. City and provincial officials are working on ways to encourage entrepreneurship and they hope the government in Brussels will situate a new prison in the area, providing 500 jobs.

But there is no way to immediately absorb all the new jobless people.

“If you know a big company that would like to come to Limburg, please let them come,” said Herman Reynders, governor of Limburg Province. “But I don’t think that’s going to happen.”


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