Ford Risks EUR14M Fine For Falling Short Of Craiova Plant Output Target

05.31.2011 By Bogdan Alecu

Ford has committed in the privatization contract signed in September 2007 to manufacture 250,000 cars in Craiova in 2011, a target impossible to achieve considering that only 3,000 cars were built in the first four months of the year.

Almost four years after Ford took over Automobile Craiova, the factory rolls out an average of 750 cars per month, far short of its 20,000-unit official monthly target for this year.

The American carmaker thus risks to be fined over EUR14 million (as provided by the privatization contract in the event Ford fails to build 250,000 cars in 2011). Negotiations with the state, towards pushing the deadline back by at least a year, have been going on for almost ten months.

"There has been progress in Ford's talks with the Romanian state and we are confident we will sign the addendum to the Privatization Contract in due time," Hans Juergen Fuchs, spokesperson for Ford Europe, told ZF.

While it waits for amendments to the privatization contract, Ford has not sped up the manufacturing process at the Craiova plant, which in one month builds around half the number of cars that Dacia builds at its Mioveni plant in a day. With the current production rate, Ford would end up with an output of no more than 10,000 cars by the end of the year, well below the 250,000 it pledged to manufacture at the time of the privatization.

Talks on changing the deadlines in the privatization contract officially started in August 2010, when John Fleming and Stephen Odell, the former and the current head of Ford Europe, came to Bucharest to meet with Romanian President Traian Basescu and Prime Minister Emil Boc. In a press conference, they requested changing the terms of the contract because of the situation of the economy in Europe. Ever since, all of Ford's executives have said the new contract would be signed "in the near future," suggesting it would be a matter of weeks or months at most, but it has been almost a year.

Halfway into 2011, there is no information on a clear date for the new contract and Romanian authorities have failed to issue any position on the matter.