American multinational automaker Ford is planning to invest up to €4.4bn ($4.8bn) into its German subsidiary, Ford-Werke, to revitalise and increase the competitiveness of its business.
The investment will support Ford’s transformation of its German operations, which are currently grappling with a debt of €5.8bn ($6.3bn).
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The multi-year restructuring plan is set to focus on increasing competitiveness and reducing costs within the challenging European car market.
It replaces a previous agreement, in place since 2006, under which Ford guaranteed to absorb any losses incurred by its German subsidiary.
Ford Motor Company vice-chairman John Lawler said: “With the new capital for our German subsidiary, we are promoting the transformation of our business in Europe and strengthening our competitiveness with a new product range.
“To be successful in Europe in the long term, we must continue to simplify our structures, reduce costs and increase efficiency.”
German labour union IG Metall expressed concerns that without this financial backing, Ford’s German unit could face insolvency.
IG Metall was cited by Reuters as saying that without the agreement, Ford’s unit in Germany “could become insolvent in the coming years if the economic situation does not improve and the parent company in the US is no longer able to offset the losses”.
The European automotive industry is grappling with high costs, soft demand, and the encroachment of Asian competitors.
This has led to plant shutdowns and workforce reductions, coinciding with potential US tariffs on auto imports.
Ford’s decision to bolster its German arm comes at a time when the adoption of electric vehicles (EVs) in Europe is progressing more slowly than anticipated.
This has led Ford to reconsider its initial target of converting all European production to EVs by the end of the decade, opting for a more flexible approach.
Lawler added: “With the financing, Ford is clearly committed to his European business. At the same time, it is essential that all stakeholders – industry, policy makers, trade unions and social partners – work together to secure the future of the European car industry.
“In particular, we need a clear political agenda in Europe that promotes the acceptance of electric cars and brings consumer demand into line with European emission targets.”
