Ford - where did it all go wrong?

But just days ago the 500 staff at Southampton’s Ford factory were looking forward to becoming a lead European plant for a next generation of Transit chassis cabs, and with it the guarantee of work for years to come.

Some were even hoping production of a new Transit model could yet return to the Swaythling plant. Then came Thursday’s bombshell – that Ford would be dumping its workforce in Southampton and a further 750 jobs at its panel-stamping operation in Dagenham, in a wave of European factory closures that will end vehicle manufacturing by Ford in Britain next year.

City leaders said they were caught totally by surprise. Unions called it a betrayal of promises made to workers.

But industry experts said the writing had been on the wall for Southampton for some time, describing the plant as “marginal” for Ford.

So where did it all go wrong? And was the plant closure avoidable? The company itself blamed economics for the decision.

Stephen Odell, Ford’s chairman and chief executive in Europe, said it was a “capacity issue” brought on by a “collapse in consumer demand”.

He pointed out that demand for Ford’s vehicles in western Europe has crashed by 20 per cent since its all-time high in 2007, leaving the company with huge manufacturing overcapacity.

“The double-dip recession has really exposed that, and in any business you simply cannot run with that level of excess capacity over a sustained period of time,” he said.

Ford also revised its loss forecasts for Europe this year to $1.5 billion – warning of a similar number next year. In July it had said it expected to lose $1 billion.

In January 2011, Ford shares were trading at $18, but the price has collapsed in the past 22 months to just $10.

Ford bosses had to act to stem the losses, and so launched a major “restructuring” plan for their European business.

They are now following a turnaround plan in Europe that had been successful in helping the motor giant avoid bankruptcy in the US. Ford’s three-point plan involves cost-cutting, new product launches and brand strengthening, and balancing production with demand.

The UK factory closures, and plans to close another in Genk, Belgium, with the loss of 4,300 jobs, were the result.

Fitch, the financial ratings agency, called Ford’s European restructuring an aggressive move, but a “positive and necessary step in rightsizing its European capacity”.

So why hit Southampton and Dagenham when the iconic Ford Transit remains the UK’s best-selling commercial van, with a near 18 per cent share of the market, according to latest industry figures? Indeed, in the UK Ford Transit sales have been rising in recent years to around 60,000 in 2011 – although Ford says they are running below that this year.

True, production of the Transit van in Southampton has been cut from 66,000 in 2008 to 28,000 last year after decisions to move the Swaythling plant to single shift operation and a four-day week.

But that would still leave a large production shortfall compared to the demand for the Transit in the UK.

The other key factor in Ford’s cost-cutting equation appears to be where the vans are built. Mr Odell himself admitted that it was far cheaper to make vans in Turkey, where Ford employs 7,500 workers at its huge plant in Kocaeli.

“There is a significantly lower cost to build and deliver from a Turkish source to anywhere in Europe than from Southampton,” Mr Odell said, explaining the decision.

The rise of the Ford’s Turkish plant (above), with its lower labour and production costs, appears to have swayed where the axe should fall.

Professor David Bailey, a motor industry expert from Coventry University, said the decision to call time on Ford in Southampton from July next year was “not a surprise”.

“The writing was on the wall when Ford shifted production to Turkey – it’s been vulnerable since then,” he said.

So when did things start to go wrong? Can the demise of Southampton’s plant be traced to the rise of Ford’s factory in Turkey? Unions certainly think so.

Roger Maddison, Unite’s national officer for the car industry, told the Daily Echo the closure announcements this week may not have been avoidable due to current economic circumstances, but he said they were circumstances Ford had “brought on themselves”.

He said Ford has poured billions of dollars into China, South America, Russia, Romania, Turkey and other countries where costs are lower, but has by comparison put little investment into the UK and Southampton.

“The main reason they didn’t want to make vans in Southampton is they invested massively in a plant in Turkey. At the time it was for the eastern European market. But the plant has grown and grown.”

He added: “Ford has never had an issue selling Transits in the UK, or with the workmanship in Southampton.

“The only thing Turkey has that Southampton doesn’t have is lower wages.”

Mr Maddison said union reps found wages as low as five euros an hour when they visited the Turkish plant five years ago – around half what staff are paid in Southampton.

More recent reports suggest that Turkish workers are paid about £4 an hour. When did the tide turn then for Southampton’s fortunes?

The city has been building Ford Transits since 1972. Nearly 2.2 million have rolled out of the plant to date. At its height in the late 1970s 4,500 people worked there on three shifts.

The plant still makes both short and medium wheel-based Transits, as well as the chassis cab variant.

In July 2005, Ford’s five millionth Transit van was rolling off the production line at Swaythling.

Ford hailed the plant as one of its “most productive facilities in Europe”, with 1,441 employees turning out 329 Transits each day, in two shifts.

Production the year before had reached a record level of 70,674 units, with around half of them exported to more than 50 countries around the world.

A new refreshed Transit model was launched in 2006, with the offer of six diesel engines and one LPG-compatible petrol engine.

But then its fortunes turned. In 2008, the Daily Echo revealed Ford was considering dropping production of the next generation of Transit because its costs were millions of pounds too high.

Company minutes leaked to this newspaper showed bosses were warning that the factory was at a “critical point in its history” and that the next Transit model “could be built elsewhere”.

A memo warned 500 jobs were due to be slashed at the plant, while staff claimed Ford was planning to cut output levels from 80,000 to 35,000 a year, with the additional production moving to Turkey.

Unions warned it would be the “death knell” for Southampton, and called a mass demo on the streets of Southampton. By the end of the year the plant shut up shop at Christmas due to a slump in demand.

In February, 2009, Ford announced that 500 staff were to be axed and production was switched to a single shift.

Uncertainty continued to surround the future of the plant. Ford bosses later confirmed its Kocaeli plant would be building the next-generation Transit commercial vehicle, not Southampton.

However, they guaranteed Southampton would continue to produce the chassis cab derivative when production of the current Transit model was due to end in 2013.

Over in Turkey, Ford began production of the Transit at the Kocaeli plant January 2001 with a much trumpeted $650m investment. The van was initially aimed at the Turkish market.

Further investments totalling $375m rapidly increased capacity of Transit and Transit Connect production to 280,000 by 2007.

And two years ago Ford announced it would pump another $630m into Kocaeli to support “future manufacturing initiatives for the Ford Transit”.

That year the plant was making 152,000 Ford Transits, a figure that has risen to 185,000 last year.

Long-serving Ford plant welder Bill Chandler, 59, from Romsey, who has campaigned to keep the Southampton plant open, visited the Turkish plant in 2010.

He said he was shocked at the scale of the operation and knew then Southampton’s days were numbered. “I thought this is huge and this is where all their operations will end up one day,” he said.

“I realised they were only keeping Southampton for cosmetic reasons until they were ready to move. It was completely obvious to me,” he said.

Some Ford workers in Southampton had hoped their plant would eventually get a major overhaul to make it the main Transit centre again, “with a full three shifts like the good old days” one worker told the Daily Echo this week.

But the 52-acre site alongside the M27 doesn’t match up in size or logistics to the Kocaeli site, run by Ford Otosan, which has its own loading port and spans 395 acres with an assembly plant three times bigger than Southampton’s.

Some have also questioned how Ford has got it wrong in Europe when rival carmakers such as Volkswagen (VW) announced last week they were still in profit.

Paul Everitt, chief executive of the Society of Motor Manufactures and Traders, said the Southampton plant closure reflected a twospeed European car-making industry.

He said those focusing wholly on the European market, such as Ford of Europe, General Motors, which owns Opel and Vauxhall, and Peugeot Citroen, had to cut capacity. Whereas VW, BMW and Jaguar Land Rover had strength outside Europe.

A mass meeting of union officials is being convened at the Southampton plant on Monday to decide what action to take.

Unions said they are prepared to fight to save the factory if members are up for it.

Ford bosses have promised staff “extremely generous” pay-offs and some redeployments.

It remains to be seen whether they will go quietly, or if there are any more twists in Southampton's Ford story.