DISTRESS AT RENAULT-NISSAN ALLIANCE AND AT FORD IN EUROPE
The automotive aftermarket does rely to a significant extent on the manufacturing capability in the country. If the required parts are used in a vehicle built in South Africa or were fitted to previous models also built there, the supply is driven by the manufacturing demand. It is the benchmark.
For importers without any manufacturing in South Africa, the above situation is the standard by which they are judged. If the manufacturing ceases in a country, as happened in Australia, parts supply will be more difficult and the pressure to deliver/cost control will be undermined.
Recent events in Europe have been simply huge: Renault-Nissan-Mitsubishi Alliance: The share imbalance created by Macron when he was a mere Minister of Industry back in 2015 has been corrected, Renault have sold off the internal combustion engine business to Geely, Nissan have undertaken investment in the new Renault EV technology company ‘Ampere’ and Mitsubishi are having a jolly good think about everything. The biggest effect: Renault’s largest market, the EU27 and UK, will be supplied with only battery electric vehicles (BEVs) by 2030.
Ford of Europe will be in effect taken apart, with more ‘American’ themes, more international products, deep cuts to the European engineering teams and – again – an intent to supply the EU27 as well as the UK with only BEVs before 2030.
Europe, excess capacity, and rising costs
From the UK ‘Net Zero by 2050’ enshrined in law with no cost / benefit analysis or plan, to the EU Commission, the political elite run our legal system. So much for politics – what has that got to do with vehicles?
Well, we find ourselves sharing with the EU27: Vehicle whole type approval, which the UK so far is not leaving. This allows vehicle manufacturers and importers to minimise costs by standardising performance criteria, setting aside that UK and Eire drive on ‘the other’ side of the road.
The aim to eliminate all internal combustion powered new cars and commercial vehicles from 2035 regardless of MHEV, HEV or PHEV assistance. The UK seek to eliminate pure internal combustion powertrain new vehicle from 2030 onwards in addition.
As soon as all routes to keep internal combustion production alive in the EU27 and the UK became blocked, component manufacturers either moved their operations out of the region or simply closed factories. This has been underway since 2019. The component supplier activity has expanded in electric powertrain technologies, but there is a net loss of employment.
The inevitable next stage has arrived, with mass closure of automotive plants across Europe and the UK. Let’s take a closer look at the Ford of Europe situation.
Ford – a long history in Europe
Ford first started European manufacturing in what is now Eire, before migrating to the UK and Germany. The plant at Dagenham opened in 1919, and the Cologne plant opened in 1931, which historically – much like GM’s Russelsheim plant – was one of the most expensive to operate but also had the best quality. By the early 1990s Ford were forced to boost the plant capacity with its cheapest vehicle line, Fiesta, because the Scorpio which was exclusively built at the plant, had finally died. Quite simply fashion had moved on and large cars built by ‘non-premium’ makes across Europe were no longer viable.
Faced with this product disaster, the Ford Cologne plant was faced with paying a huge amount of cash to pay off the workers – or get them to build vehicles. The Fiesta was in demand, extra capacity was needed, and the maths kind-of worked. However, as with much of Germany, labour rates were high and did not fall. The writing was on the wall – and Ford ignored it for three decades.
Ford steps out in 2023
In a familiar pattern for Ford, a barrage of announcements were made. First up, the planned in-depth marriage with Volkswagen Group would be instead just a fling, with just two products to appear on the MEB platform. Next up, having announced years ago that Mondeo would cease and not be replaced, came this:
Fiesta – stopped in June 2023, no replacement.
Focus – stopped in 2025, no replacement, Saarloius plant to be closed.
S-Max and Galaxy – stopped in April 2023, no replacements.
Transit Courier (a van version of the now ceased B-Max) – no replacement, and the Romania plant sold to Ford partner Otosan to build yet more Transits.
The main product development centre for Fiesta and Focus is Merkenich, next door to the Cologne plant – will lose 1 700 product engineering jobs and 600 admin jobs. Meanwhile the UK engineering centre at Dunton will lose 1 000 product engineering jobs and 300 admin roles. A further 200 product engineering/admin jobs will be lost across the Ford of Europe operation beyond Germany and the UK. A total of 3 800 job losses – which will impact the associated supplier business too. A massive, massive error as engineering talent walks out of the door, unlikely to ever return.
The Saarloius plant – which has 15 bidders including BYD – may yet lose all 4 600 jobs. Anyone working at the Cologne plant not on the BEV programme which uses the Volkswagen Group MEB electric powertrain, will also lose their jobs. More cuts will follow.
Struggling with overhead, costs, and a new vision
Amid this chaos, the view from Dearborn is clear: Ford of Europe will disappear and they plan to import / build more ‘upscale’ vehicles. Ford NAO think they can come to Europe with the Bronco, and clean up. After all, they did used to own Land Rover so think they know many things. Possibly they do, but not about Land Rover.
The word used by Dearborn is ‘Americanise’. Ford, the ‘Captain Sensible’ of the Big Three, is now also taking the pills that led to GM leaving the European market.
Concentrating on BEVs is politically expedient, but unless costs fall significantly sales will remain stubbornly small. Sure, the tax penalties for making vehicles with any sort of internal combustion engine hurts, but the profitability per unit is way, way ahead of BEVs which are mainly break-even. Then we come to vehicles engineered primarily for the North American market, which have always had a small but dedicated following in Europe: Again, just how is this supposed to go from niche to volume sales with zero support?
Finally, the fashion bit. Ford in Europe were for many decades very, very good at reading trends, but annoyingly had limited success except in the UK. For some decades they have been fumbling about, producing great vehicles in a sea of outstanding vehicles. The idea they want to go ‘SUV only’ is very, very late – Nissan did that more than 10 years ago. Where will Ford be as the fashion swings around to lower riding vehicles? Nowhere.
Ford North America builds a smaller pick up called Maverick which had huge market take-up, based on Escape and which also lends its platform to the Bronco Sport, which is nothing like a full USA scale Bronco. In effect Bronco Sport is related to Bronco in the same way Land Rover Discovery Sport owes nothing to Discovery No 5. Maverick is dancing out of the show rooms in North America, but are Ford promoting this for Europe? No, not yet.
The 2022 results were sobering. Reasonable turn over, a US$ 2 billion loss and ‘disappointment’. The above plans will add to the one-off costs for 2023, and if any of the plan does not work, including a return to F1 by 2026, Ford will effectively vacate the European market.
Renault cuts its own throat
There is considerable unease over the effective sale of the internal combustion engine business to Geely, since Renault instigated this deal which includes Alliance co-designed powertrains. Nissan publicly accepted the arrangement, but I am sure in private they could not understand why this happened with almost no input from the biggest company in the Alliance. The ‘deal’ affects powertrain manufacturing in Europe, and not the other Alliance facilities outside Europe.
Geely are very excited, given the previous deal they landed with Volvo Car turned out to be less than they imagined. As for Renault, they are on a single road with a visible dead end. If BEV does not work, it will be very hard for them to come back.
A road not to follow…
The EU Commission and European Parliament have only just realised what they have done, when it is already too late. Of course, there is no admission of fault, nor change in policy.
South Africa once again is in a better place, given most of the world is not following the European ‘BEV or else’ path to oblivion. Further, that parts supply situation remains relatively strong due to domestic manufacturing – our European friends do not even know about this effect yet. Literally the European losses will be gains for South Africa.
Energy issues are huge, but within the automotive business having domestic manufacturing is also a huge deal. Such plants can go from busy to nothing in a matter of months, so please appreciate all those domestic manufacturing locations and the real benefit they bring. Whilst parts supply is strained, it would be much, much worse without domestic manufacturing.
By Andrew Marsh