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Ford loses ground in Europe as customers shift to Hyundai

Publish Date28/08/2012 12:52:23 PM

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Ford loses ground in Europe as customers shift to Hyundai

Ford Motor Co. is losing market share and gathering losses in Europe as customers are abandoning Ford’s models for Hyundai’s newcomers.

The Dearborn, Michigan-based company is losing ground not only because Hyundai’s models are cheaper but also because their designs is attractive.

Yet, Ford’s main disadvantage is labor expenses, believed to account for as much as 10% of production costs.

Since Ford’s European factories are found in Western Europe, in countries like Germany, UK and Spain, where workers demand high wages, more than double those at Hyundai’s factories, Ford’s growth prospects are dimming.

Meanwhile, Hyundai built modern facilities in the low-cost Eastern Europe, in countries like Czech Republic, Slovakia and Turkey, allowing for a more efficient production network and making it hard for other companies to stand out from the competition.

Moreover, because Hyundai’s “products are comparatively affordable” it can keep its factories running at full pace and avoid losing money.

Auto factories usually need to work at around 80% of its capacity to make money, while Ford’s European plants only work at 63%, said Morgan Stanley.

As a result Ford reported a second-quarter operating loss in Europe of $404 million after a profit of $176 million a year earlier, as European sales fell 9.9% to 532,819 vehicles in the first half.

Meanwhile, Hyundai’s sales advanced 12% to 232,454 cars in the same period while the other South Korean brand Kia jumped 25% to 173,232.

In a comparison, Ford pays workers about 480 euros to make a Focus compact in Germany while Hyundai pays workers about 207 euros to make a Hyundai i30 in Czech Republic.

Relocating production to Eastern Europe from the West may not be the solution for Ford. In 2002 Ford moved its European headquarters from UK to Germany and closed much of its Dagenham facility; since then sales in Britain dropped by 44% to 265,894 units.

Moreover, Ford does have plants in Romania and Turkey where it makes vans, yet it didn’t to take advantage of that since it failed to find the right vehicles to build in the low-cost factories.

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