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Ford slashes 2,000 jobs in China after sales drop nearly 40%

Further layoffs possible at joint venture as trade war dampens auto market

The automaker has been slow to roll out sport utility vehicles and other popular models.   © Reuters

BEIJING/TOKYO -- Ford Motor's main Chinese joint venture is reducing its workforce by 2,000, or about 10%, after suffering a sharp reversal in the world's biggest auto market, according to company sources.

Several executives revealed the decision to cut jobs at Changan Ford Automobile, which is owned equally by Ford and state-owned China Changan Automobile Group.

Changan Ford's cuts mostly affect its main plant in Chongqing. The joint venture, whose 2018 unit sales fell by nearly half, began the cutbacks late last year and plans to carry them out over several months. The company may double the scale of the job reductions if sales fail to recover, the executives said.

"Our people are one of our most valued assets at Changan Ford," a company spokesperson said in a statement. "To that end, we must continue to improve organizational efficiency and are committed to building a more streamlined and efficient team to meet the needs of the market in 2019."

"As a result, we have not renewed some recently ended service contracts," the statement read. The spokesperson did not confirm the specific number of jobs that would be cut.

The move came after the U.S. automaker's overall Chinese sales fell 37% for 2018 to 750,000 vehicles. China's overall new-car market shrank in 2018 for the first time in 28 years. If ongoing U.S.-China trade tensions continue, the market could slow further, pushing the auto industry into a wider shakeout.

Changan Ford, which also makes cars in the eastern Chinese city of Hangzhou, employs about 20,000 workers.

Ford's troubles in the Chinese market owe to a failure to keep up with increasingly selective consumers. The automaker has been slow to roll out sport utility vehicles and other popular models. Although the sales slump comes against the backdrop of a trade war, there have been no widespread boycotts of American brands in China.

Confusion at dealerships appeared to compound the troubles as Ford faced a bumpier road than expected in integrating the sales network of Changan Ford with that of its other Chinese joint venture, Jiangling Motors.

Ford's Chinese executive lineup has been shuffled frequently in recent years, caught between the demands of both the automaker's U.S. headquarters and the Chinese partners.

Concerns have been raised that the workforce cuts may hamper Ford's plans to introduce at least 10 new SUV models for the Chinese market this year.

Several global automakers have scaled down their Chinese presence or retreated outright. Suzuki Motor ended production in China last year to focus on core markets like India and its home of Japan, while South Korea's Hyundai Motor has begun cutting staff at its own local joint venture.

Meanwhile, China's electric vehicle makers are buying up smaller conventional automakers struggling to fund the research and development needed to comply with Beijing's requirement to build more electrics and other new-energy vehicles. Trends like car sharing add to the pressure on weaker players.

Electric car startup CHJ Automotive said in December it would buy Chongqing-based Lifan Motors. The next month, midsize electric vehicle producer Levdeo announced it would purchase a stake in Sichuan Province's Yema Auto.

Though Chinese operations look healthy for major automakers like Zhejiang Geely Holding Group and Japan's Toyota Motor, some rivals are trimming production in China to shore up profitability. Mazda Motor and Mitsubishi Motors cut January output by roughly half from a year earlier, while Nissan Motor is slashing production by about 30,000 units over the three months through March.

Japanese automakers appear to be shifting away from a long-standing strategy of building cars for the Chinese market in China.

Honda Motor plans to export hybrids and other environmentally friendly vehicles made in China and Japan to Europe, President Takahiro Hachigo said in a February announcement regarding the closure of a U.K. plant. The move likely aims to supply stable work for Chinese factories.

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