Inside Ford’s Turkish goldmine: home of the Transit

For a long time the words Ford, Europe and profits were strangers as the firm's car business failed to translate popularity into income. Even its money-making van business couldn’t staunch the red ink in the region. Now, however, after Ford dramatically slimmed down the car business and poured investment into vans, the company’s profitable joint-venture partnership that builds Ford Transits in Turkey is turning into a goldmine for its partners as its annual production capacity approaches almost a million vehicles. Last year Ford Otosan – a 50:50 partnership between Ford and Turkey’s Koc Holdings – made a profit of the equivalent of £1.1 billion on revenues of £10.1 billion, both a record. The resulting 10.7% operating margin was the second best in the last 12 years, during which it didn’t once make a loss. Ford, on the other hand, posted a series of losses in Europe in the same timeframe, losing $398 million (£320 million) in 2018, $47 million in 2019, $851 million in 2020 and $154 million in 2021. Ford’s restructuring in 2022 to focus on three strands of combustion-engine cars, EVs and commercials (Blue, Model E and Pro respectively) halted financial reporting of the regions, so we can no longer see the financial effect of Ford stripping out models like the Fiesta, Mondeo, Galaxy and S-Max, as well as shutting facilities such as the Bridgend engine plant and a gearbox plant in France. However, the account books of Ford Otosan remain open thanks an 18% float on the Istanbul stock exchange (Ford and Koc own 41% each). And the story they tell is that Ford’s decision to focus on a relatively unknown partnership to strengthen its successful Transit van line is paying dividends (literally). The Ford/Koc tie-up goes back to 1959 and is a shining beacon of longevity amid many other broken Ford joint ventures, including with Sollers (Russia), Mahindra (India) and Zotye (China). Its relationship with Changan (again, China), meanwhile, is shrinking. “We consider this as our most successful partnership in our history,” Hans Schep, head of Ford Pro in Europe, told journalists on a recent visit to the giant waterside Kocaeli plant in Izmit, Turkey. One big reason for the boost in Ford Otosan revenue last year is that in 2022 the joint venture agreed to pay €625 million (£535 million) to buy Ford’s Romania plant that makes the Puma small SUV as well as the newly launched Transit Courier compact van. The addition of Romania and the recent overhaul of the Kocaeli plant in Turkey means that Ford Otosan now has one of the biggest manufacturing footprints of any vehicle maker in Europe, with a production capacity of 746,500 and a staff of 23,701. By next year that production capacity will rise to 900,000. Of that, Romania accounts for 272,000 with the rest coming from Turkey. Kocaeli, with its deep port access, is actually two facilities split by a river. Golcuk, established in 2001, is home of the large Transit, but it’s the Yenikoy facility established next door in 2014 that looks furthest into the future of Ford Otosan’s “low-cost, high-quality” manufacturing. This facility builds the new Transit Custom one-tonne van in electric, plug-in hybrid and diesel formats and later this year will build the related Volkswagen Transporter replacement after Ford Otosan increased capacity to 405,000 vehicles a year. The key to the financial success is that Kocaeli runs on three shifts, six days a week, meaning that last year was operating at 84% capacity. Contrast this with the 20% capacity of factories run by Ford and its Chinese joint-venture partner Changan, according to recent figures from Bloomberg. The revamped facility Yenikoy is impressively automated at more than 82% in the body shop. Autonomous trolleys whisk parts to the assembly line, with one each for the Transit Custom and VW Transporter replacement. Ford remains cautious on investment, however. For example, last year it postponed a planned battery plant in Turkey after noting weakening demand for electric vans. Turkey’s success is bound to trigger some residual pain in the UK knowing Transit production was once a staple of Southampton until it was moved out in 2013. But the UK still has as strong connection with Ford Otosan. For example, every diesel Transit destined for export out of Turkey comes with an engine built at Ford’s Dagenham facility in Essex, while upcoming electric versions of the Courier van and Puma built in Craiova will receive electric drive units assembled at Ford’s old gearbox facility in Halewood, Merseyside. The deputy manager of Ford Otosan – Ford’s highest-ranking employee at the joint venture – is Britain’s Jo Payne, a Hall of Fame entrant into Autocar’s Great Women in the British Car Industry initiative. On top of that, the UK is the biggest export destination for the Turkish-built vans, accounting for almost a quarter of nearly half a million Transits exported last year. Germany was second with 17% and France third with 12%. The strength of the UK’s van market – the biggest in Europe – is a big reason for the success. The Transit Custom is by far the most popular, selling 12,076 in the first three months of the year, making it the UK’s fourth-most-popular vehicle outright, according to figures from the SMMT. The large Transit was the second-best-selling van. The Ford Puma – a Ford Otosan product remember – was the outright best-seller at 15,054. It’s not all plain sailing for Ford Otosan. Taking an edge off those record profits was the fact the Craiova plant lost 567 million lira last year (£14 million), partly due to a tax penalty and partly because Courier sales were not as high as expected in the last quarter of the year, according to the company’s investor report. Another issue is Turkey’s rollercoaster economy. The chronically weak lira has consistently lost value against the euro over the past five years. That’s a benefit for an export-led business, of course, and some of the jump in operating margin has come from this, the company said. That has to be offset, however, against rampant inflation, running at a whopping 68.5% in March. Raw material costs, for example, rose 18% in 2023 compared to the previous year. The weak currency and high inflation generally cancel each other out, one executive told Autocar. What’s clear, however, is that Ford’s strategy first laid out in 2019 to prioritise vans ahead of cars and particularly its Ford Otosan partnership is bearing fruit. While we don’t know whether its remaining car business in Europe is still an anchor on profits, the fact that the money-making Ford Otosan partnership is becoming the company’s dominant industrial force in the region has to make a big financial difference.