Ford has announced it will spend up to EUR200m to build the EcoSport B-segment SUV at its Craiova assembly plant in Romania starting autumn 2017.
EcoSports sold in Europe, excluding Russia, currently are built at Ford India’s Chennai plant. Chennai will continue to build the model for domestic sale and export markets outside Europe.
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Craiova, the former Daewoo plant purchased from the Romanian government, has been a problematic plant for Ford since it was announced in 2008 – during the global financial crisis – as the future plant for the new B-Max small MPV (minivan). Barely six months later, and ahead of the B-Max production start, the automaker announced European capacity cuts (which ultimately led to the 2014 closure of the Genk plant in Belgium) and its commitment to factories in Germany, Spain and Romania. Though it is an appealing product, B-Max sales have never reached expectations of 300,000 a year. B-Max output, originally scheduled for the spring, started in summer 2012 but, as early as the following November, Ford halved production to 250 a day from 500. Despite some encouraging summer sales results, production was stopped for a week in September 2013 and again for 13 days in November, the automaker’s third straight month of stoppages in response to then-weak European demand.
The bad news continued into 2014 with Ford announcing a further four non-production days for February followed by the March 2015 announcement of 500 layoffs at Craiova though that was lower than the 680 announced inititally the previous November.
Such ups-and-downs have also affected the many suppliers Ford and Romania attracted to the plant such as Magna, with its plastic bumpers and exterior trim component moulding, painting and assembly factory-within-a-factory operation plus the nearby Johnson Controls facility built specially to supply seating on a just-in-time, just-in-sequence basis.
Ford has always relied on considerable Romanian state aid for the plant and, in 2008, the European Commission threatened to block a government payment of EUR57m for a Craiova training programme due to ‘illegal state aid’ fears. The move came five months after the commission approved a payment of EUR143m in other subsidies from the Romanian government to Ford, to help turn around the Craiova vehicle manufacturing complex, which it took over in March 2008. Brussels approved the hand-out in December 2009 while, in January 2010, the European Investment Bank (EIB) approved a EUR400m loan to Ford Romania – 80% guaranteed by the government – to help it expand and modernise Craiova after its Daewoo ownership, tooling it up for the B-Max and associated one-litre Ecoboost engine production.
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By GlobalDataFord this week hinted it was not finished with state aid to keep the plant going.
“Today’s (22 March, 2016) announcement follows productive discussions with the Romanian government on developing a framework to help Ford transition from its existing investment to this new opportunity and to help maintain the global competitiveness of the [Craiova] manufacturing operations,” the automaker said in a statement.
“Since taking over the [factory] in 2008, Ford has [spent] more than EUR1bn [on] its Romanian manufacturing operations.”
Ford added it would “continue to seek opportunities to build further products in Craiova so that it can fully utilise the facility’s capacity and asset utilisation”.
“Craiova has a bright future if it continues to improve its competitiveness and operational flexibility. The recent successful agreement on a two-year labor contract was a very positive step,” Ford’s EMEA region chief and Ford Europe president and CEO, Jim Farley, said in the statement.
“We also need to continue to work with the government and local authorities to improve infrastructure and logistics.”
“EcoSport sales are up nearly 30% this year and given the continued outlook for sales growth in the small SUV segment, it’s the right time to move production to Europe and take advantage of the excellent workforce and operations we have in Craiova,” added Farley.
According to Ford, SUVs are the fastest-growing segment in Europe, up 23% last year compared with an overall industry sales growth of 10%. The small B-SUV segment, in which EcoSport competes, rose 44% in 2015. The automaker expects the segment to grow to about 1.5m vehicles a year by 2017 – an increase of 35% on 2015.
Ford said recently it would launch five new vehicles to compete in SUV and crossover segments in Europe in the next three years, starting with the Edge in the second quarter of 2016. Ford expects to pass 200,000 SUV sales in Europe for the first time in 2016 – growth of over 30% compared with 2015.
Website romania-insider.com said the decision to start producing the EcoSport might also turn Ford Romania into one of the country’s biggest companies in terms of revenues and exports, and further boost the country’s automotive sector. Dacia, owed by Renault, has become the country’s biggest company in the last two years, due to strong sales of its Duster SUV in Europe. In 2015, Ford produced about 48,000 B-Max cars at Craiova, 9% fewer than in 2014.
The website noted that, when Ford bought the factory, it had promised to reach production of 250,000 cars by September 2011. The factory consequently has only 2,650 employees compared to the 7,000 Ford had planned before the financial crisis.
The “better infrastructure” Ford wants includes a highway from Craiova to Pitesti and a better railway connection, romania-insider.com said.
