Ford saves Spanish plant in Almussafes over Belgian Genk

Ford CEO

Ford Valencia 1991

Finally some good news, no ifs or buts. The Ford plant in Almussafes in Spain has guaranteed its future in spite of the closure of the factory that the multinational has in the Belgian town of Genk. Ford announced a decision that was feared as well as expected in Belgium.

And yet, it was still shocking: media showed images of weeping factory workers before the impending closure.

It was not an easy decision. This is the closure of a plant with more than 4,000 employees that for years has been one of the leading brands in Europe along with two German factories (Cologne and Saarlouis) and Almussafes'. It is possibly one of the most important moves Ford has made in recent decades, only similar to that in which they left the UK a long decade ago.

The closure of a plant like Genk’s, where a range of models that have now been entrusted to Almussafes were built, is due to several reasons. The first and obvious is that Ford has excess of installed production capacity in Europe.

Some years ago the multinational decided to rearrange its plants worldwide. They wanted to rationalise their investments and labour (as well as investment in production lines) to tackle the radical change in the auto market caused by the crisis. Today it has four remaining plants in Western Europe, two of which are untouchable: Cologne, multinational headquarters in the old continent, and Saarlouis, considered Almussafes’ twin, both in Germany.

The battle between Genk and the Valencia region-based factory was served. And no one should be deceived: Ford could have closed Almussafes several times in recent years. Sentences on why one plant is kept and which one is dismantled are issued in Detroit and a poor economic return is what counts.

However, in a recent visit to Valencia, global Ford’s CEO Alan Mulally suggested that the Belgian plant would be sacrificed. Producing cars in Almussafes was and is cheaper than in Belgium. Wages costs help, of course. But this is not the only piece data that must be taken into account, moreover when the difference in the price of labour is not new. It's been that way for decades even if that has not granted Almussafes its workload, unlike Cologne.

In addition to the wages, Valencia plan also has a better cost production structure. Its manufacturing system, with the supplier park annexed, allows a more efficient distribution and assembling of all vehicle components. And this is due to decades of Valencia’s Ford good performance.

But all that would not have been enough to swing the balance definitely. Despite criticism brought about at the time, the role of the UGT union section was crucial:  they reached an agreement with the European management to introduce more flexibility in exchange for workload. A mix of social peace, flexibility and commitment to the maintenance of the plant that, despite the crisis in the sector, appears to be working.

That flexibility has given Ford, with Valencia authorities approval, almost total freedom to regularly present redundancy agreements to adapt production capacity to demand. The current year was probably the most difficult in the history of the plant.

But this, again, could be useless. At the end of the day, Ford has already opened plants in countries where labour is much cheaper and work flexibility is much higher. Russia and Turkey have already multinational factories. What prevents production to be transferred to those factories? Nothing really, and yet it can affect the quality of the final product.

Consistently, Valencia has launched new models with success, whereas Cologne or Genk have experienced difficulties. No one knows what Ford will do in 2015, but Almussafes has won this fight on merit.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.