Ford Motor Co.'s (F) European division Monday said that it was adjusting production capacity to shrinking demand and signaled that further steps will follow to lower costs and to ensure profitability.

"Cutting capacity, reducing costs and safeguarding our future product plans are essential actions for Ford of Europe to sustain a viable business for the future," said Ford of Europe Chief Executive John Fleming in a statement.

"Ford of Europe must return to sustainable profitability as soon as possible. We will do whatever it takes to ensure the continuing viability of our business, and further actions can be expected," Fleming added.

In addition, Ford's European unit said it is realigning its sourcing plans to meet its future business needs, given that demand is unlikely to improve significantly in the European market "for some considerable time."

The actions in Europe mainly affect Ford's operations in Germany and Spain as well as its new Romanian manufacturing facility in Craiova.

In Spain, the Valencia plant will move to a two-shift pattern from May 1 from three shifts currently. "Further discussion is continuing with all parties on how to manage the surplus labor in the short-term," it said.

The Fiesta production will continue at Valencia, and Ford Focus production will be replaced by production of the next-generation Ford C-MAX.

In Germany, the Saarlouis plant will continue with its current plan of shorter working hours. "The current labor level will be reviewed on a regular basis to determine if it is sustainable," Ford said, adding that Saarlouis was confirmed as the lead plant for all derivatives of the next-generation Focus model. However, the Kuga and C-MAX production won't be replaced there when production ends, it said.

The German engine plant in Cologne will share the production of a new, small-displacement EcoBoost petrol engine with the Craiova plant in Romania.

"I believe the important actions we have announced today ...will enhance Ford of Europe's ability not only to survive the ongoing current economic crisis, but to emerge from it as a stronger and more competitive business once the economic situation eventually improves," Fleming said.

Ford's announcement echoes similar cutbacks at many other automakers in Europe as demand for new cars continues to slump and companies slash output to avoid the buildup of inventory.

The European division of Detroit peer General Motors Corp. (GM) is currently seeking EUR3.3 billion in state aid from Germany and other governments in the region to stave of insolvency.

However, Ford's sales in Europe have been less severely affected by the market downturn than those of GM.

According to the European Automobile Manufacturers Association, or ACEA, Ford last month posted a 12.7% fall on the year to 95,164 new-car registrations in Europe. This was despite a 31% slump at the Volvo brand to 13,514 cars. Registrations for Ford's core brand were down 8.6% on the year at 81,650 cars, while the overall market was down 18% on the year.

GM saw registrations fall 22% on the year in February to 86,344 cars in Europe.

 
   Company Web site: www.ford.com 
 
   -By Christoph Rauwald, Dow Jones Newswires; +49 69 29 725 512; christoph.rauwald@dowjones.com