Ford Motor has announced it will increase output at its Almussafes plant in Spain by 80%, bringing annual capacity to 300,000 units by 2014. The factory is to produce the compact Kuga sport utility vehicle and the Transit Connect commercial vehicle. BMI believes Ford is keen to improve its global production capacity; using Spain's export-orientated production capacity should allow it to achieve this.
In November 2012, Ford confirmed that it will produce its new Transit Connect Wagon, destined for the US market, at the Almussafes site. In the US, Ford's production is currently running at 114% of capacity, so it is unable to easily boost output there without further investment. At its Spanish facility, however, production is currently running far below capacity, so boosting production will be easier. The company expects to sell around 40,000 units of the Transit Connect Wagon annually.
In October, Ford announced that it is shutting its UK and Belgium facilities, and will relocate 'production of key products', consolidating vehicle output in Turkey. Ford says this will give it a 'more efficient manufacturing footprint, significantly improved plant utilisation, and workforce reductions' ( see our online service, October 26, 'BMI Overcapacity View Playing Out').
BMI maintains a bearish view on vehicle production in Spain, forecasting a 12% decline in 2012 ( see 'BMI Slashes Production Forecast On Weak European Outlook', March 7). A large proportion of production in the country is for export, particularly to Europe, where sales are declining substantially.
We believe that vehicle manufacturers in Spain may seek to shift their focus away from Europe towards higher-growth markets. This may serve to boost exports, and hence production volumes, over the longer-term, despite our bearish European sales outlook. We expect this trend to continue, with other auto firms in Europe seeking to boost production and export growth elsewhere ( see 'Fiat Commits, But Bearish Production Outlook Remains', September 24).
On the back of Ford's investment in the country - coupled with the likelihood that Spain will reorient its exports towards higher-growth markets outside of Europe, and our belief in a resurgence in European sales volumes from 2014 onwards - we maintain a less bearish outlook on vehicle production in Spain for the longer term. In 2017, we forecast a 5.2% fall in total vehicle production, a considerably less bearish outlook than for 2012.