Within the contexts of globalization, rationalization and modularization, this article seeks to explore why Ford Europe performed so badly in the second half of the 1990s, sustaining heavy losses and falling market share. The causes of this are deep‐rooted and are traced to poor model development and a failure to realise that the market for cars was fragmenting with the emergence of new segments such as people carriers, sports utility vehicles and premium brand cars, etc. This was made worse by high costs due to excess capacity and a crucial weakness in diesel engine technology. Moreover, the European scene of operations appeared to be marginalized compared with developments in other parts of the world in Ford 2000. Ford’s response was a reorganization of its European management structure, the development of new models, an attack on its excess capacity and costs through plant closure and redundancies, the forming of strategic alliances to improve its position in diesel engine technology and transmissions and, finally, the development of its Premier Automotive Group.
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