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2012-08-31 09:39

FORD'S QUICKER TO BUILD, MORE EXPENSIVE: Ford will need to reduce its production costs if it hopes to regain billions lost in 2012 as high costs hamper the US automaker in Europe.

Ford has reported a loss equivalent to R3.4-billion in 2012 in Europe with sales down by 10% and it all seems to be Hyundai's fault.

The automaker is losing market share and piling up losses in Europe with a model line-up that has failed to stand up against its Korean rival.

The Detroit News says Ford has had to cut prices, even though it's hampered by labour costs in Europe that are more than double those paid in Hyundai's factories.


According to the DetNews, Ford is severely disadvantaged by factories set up decades ago in Europe where employees demand high wages. Hyundai built modern facilities in the low-cost eastern Eurpeon region which also has lower wages and efficient infrastructure. Marc-Rene Tonn, an analyst with Warburg Research in Hamburg, Germany, estimated that wages and related expenses accounted for as much as 10% of production costs.

Ford workers at its factory in Saarlouis, Germany, set up in 1970, are paid the equivalent of R5000 to make each new Focus with calculations based on man-hour estimates and published labour costs. That is about R2800 more than the R2200 estimated labour cost for a Hyundai i30 at the Korean automaker's plant near the Czechoslovakian town of Nosovice.

The difference helps Hyundai to offer the i30 at a much lower price than the Focus.


With discounting in Europe's slumping car market exacerbating the cost disadvantages, Ford reported a second-quarter operating loss near R3.4-billion after a profit of R1.4-billion in 2011.

Its European sales dropped 9.9% to 532 819 in the first half of 2012; Hyundai grew 12% to 232 454 while sister brand Kia's sales increased by 25% to 173 232.

The DetNews cites data from the Centre for Automotive Research at the University of Duisburg-Essen, Germany, that say Hyundai can build a car in Nosovice in 19.5 man hours. Ford is reportedly quicker at 11 hours but that isn't enough to offset German labour costs: R465 per hour they are nearly four times the R112 paid to workers in the Czech Republic.

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