Ford to Produce New Fiesta in Germany

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Ford Motor Co. (F) has struck a deal with its German workforce, whereby it will manufacture the next generation Fiesta compact car in Cologne during 2017 to 2021. The automaker also agreed to avoid any layoffs due to restructuring. Ford will also refrain from reducing the hourly wages of its German workforce.

In return for these concessions, Ford’s entire German workforce of over 24,000 people agreed to increased flexibility in their working hours and days. This means that from 2017, Ford can increase or reduce their working hours by up to 30 minutes per day to suit its requirement.

Moreover, vehicle assembly will be done in only two shifts and there will be no night shift, which will save expenses significantly as these are very costly in Germany. However, engine production will be done in three shifts. Labor costs are significantly higher in Germany, compared with other countries like the U.S., Romania and even Japan.

According to Ford, the agreement will lead to savings worth $400 million during 2017–2021. Meanwhile, the automaker will add 500 engineers to its 4,100 strong workforce at the Cologne plant.

Earlier it had been reported that Ford might produce the next generation Fiesta in Romania to attain cost benefits. In fact, the CEO of Ford’s European operations divulged that other plants had been considered for production of the car before settling on Cologne.

Ford is struggling to attain profitability at its European operations. The company had to shut down two manufacturing operations in Britain last year. It also plans to close its assembly plant in Genk, Belgiumby the end of 2014.

Ford currently carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks worth considering are Fox Factory Holding Corp (FOXF), Gentherm Incorporated (THRM) and Tower International, Inc. (TOWR). All these stocks carry a Zacks Rank #1 (Strong Buy).

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