The sign of Ford is reflected on the hood of a vehicle at a Ford dealership in Libertyville, Illinois, the United States, on Jan. 6, 2021. [Photo/Xinhua]

Ford Motor Co. has announced plans to cut 4,000 jobs across Europe by the end of 2027, citing weak electric vehicle (EV) demand, economic headwinds and increasing competition.

The downsizing will affect 14 percent of the automaker's 28,000 European employees and 2.3 percent of its global workforce of 174,000. The majority of the layoffs will take place in Germany, with 2,900 positions to be eliminated, followed by 800 in Britain and 300 across other European nations. Ford emphasized that the layoffs would be carried out in consultation with labor representatives.

The move underscores the difficulties automakers face in Europe, where high operational costs and sluggish demand are hindering the adoption of EVs, despite the region's ambitious climate goals.

Layoff trend

Ford's move is part of a broader trend affecting the European automotive sector. Weak demand in key markets, coupled with rising costs, has spurred a wave of job cuts by major carmakers and suppliers. Other companies such as Stellantis, Continental, ZF, Bosch, and Schaeffler have all announced plans to reduce their workforce, with Germany being the epicenter.

Continental is set to cut around 7,150 jobs in its automotive division by 2025, with 40 percent of the reduction in Germany. ZF aims to reduce its German workforce by 11,000 to 14,000 employees by 2028. Schaeffler, following its merger with Vitesco Technologies, plans to lay off 4,700 workers across Europe, including 2,800 in Germany. Bosch is expected to cut more than 7,000 jobs, largely in its automotive segment.

"The global auto industry is undergoing significant disruption as it transitions to electrified mobility," Ford said in a statement. The company highlighted Europe's unique challenges, including competitive pressure, stricter carbon dioxide emission regulations, and misaligned consumer demand for EVs.

Ford has already reduced working hours at its Cologne plant in Germany, where it produces the Explorer and Capri EVs, following disappointing sales despite a 2-billion-euro (1.9 billion U.S. dollars) investment to transform the facility into an EV manufacturing hub.

Ford's struggles are also reflected in its market performance. The automaker reported a 26-percent drop in its third-quarter net profit to 892 million dollars. According to the European Automobile Manufacturers' Association (ACEA), Ford's market share in Europe fell to 3.35 percent as of October 2023, with year-to-date passenger car sales down 17.5 percent compared to 2022.

Volkswagen is also grappling with restructuring challenges. Its Audi unit will close its EV plant in Brussels by February 2025. The company has indicated plans to close at least three of its 10 factories in Germany, potentially cutting tens of thousands of jobs, and is reportedly considering a 10-percent pay cut across its workforce as part of cost-saving measures.

Challenges in Germany

Germany's position as the epicenter of job cuts is linked to its high labor and energy costs. Markus Wassenberg, general manager of Ford Germany, highlighted that these costs have become unsustainable.

Automakers in Germany face additional challenges, including regulatory pressures to transition to EVs and a sluggish European market, prompting companies to reevaluate their operations and cut costs to stay competitive.

"Collapsing demand from Germany and abroad, high energy and labor costs, and burdensome taxes and bureaucracy are weighing heavily on business prospects and finances," said the German Chamber of Commerce and Industry.

Ford CFO John Lawler urged Germany to implement clear policies to support e-mobility, such as expanded charging infrastructure, consumer incentives, and greater flexibility in meeting CO2 targets. He emphasized Ford's commitment to climate goals but warned that stronger measures are needed to ensure the industry's competitiveness and success.

Economic challenges in Germany are mounting, with stagnant global demand, a skilled labor shortage, and intensifying competition. Its economy is forecasted to contract for a second consecutive year in 2024, making it the weakest performer among the G7 advanced economies.

The German federal government has revised its 2024 economic growth forecast downward from 0.3 percent to minus 0.2 percent, reflecting an economy slipping into recession.

Adding to the bleak picture, business bankruptcies in Germany soared by 22.9 percent in October compared to the same month last year, signaling the continued struggles of the European economy in general.

Excluding June 2024, monthly insolvency rates have seen double-digit year-on-year growth since June 2023, the German Federal Statistical Office reported on Thursday.

"High energy costs, excessive regulation, aging infrastructure, and shortages of skilled workers and raw materials are all contributing to Germany's economic malaise," said Zheng Chunrong, director of the Center for German Studies at Tongji University. "It remains uncertain whether Germany can keep pace with the United States and emerging markets."