Ford Motor Co will keep production of the Fiesta, its top-selling European car, in high-wage Germany after agreeing with workers to cut assembly costs as it looks to end years of losses on its European operations.
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The U.S. carmaker said on Tuesday management and workers had agreed to scrap costly night shifts, increase flexibility on working hours and reassign work from suppliers to Ford, delivering total savings it estimated at $400 million between 2017 and 2021.
Ford is eyeing European profits in 2015 and hopes the measures applying to the plant in Cologne, where the Fiesta hatchback is made, will help it stay lastingly profitable, having been loss-making since 2011.
"The agreement will make the plant more cost efficient, ensuring that next-generation Fiesta production will be globally competitive," Ford said in a statement.
The company will also hire about 500 engineers at its development center in Cologne, one of two German factories, which employs about 4,100 staff.
The brand is launching at least 25 new or upgraded vehicles between 2012 and 2017, including the EcoSport compact SUV and the larger Edge model, and is pushing upmarket with high-end versions of existing models.
The agreement published on Tuesday ends months of uncertainty for staff in Germany. Media had reported that Ford may relocate production of the new Fiesta to low-cost Romania, where 3,600 workers already produce the B-Max model at a plant in Craiova.
"We absolutely looked at other plants," Barb Samardzich, chief operating officer at Ford's European division, said on a conference call.
Labor costs in German manufacturing industry were an hourly 36.98 euros per worker in 2012, compared with 29.56 euros in Japan, 25.87 euros in the United States and 3.78 euros in Romania, according to the Cologne-based IW economic institute.
Ford closed two smaller manufacturing operations in Britain in 2013 and plans to shut its Genk, Belgium, assembly plant at the end of this year, cutting about 5,700 jobs in total. (Editing by David Holmes)