Ford will inject up to 4.4 billion euros (HK$37.44 billion) into its struggling German operations as it tries to revive its European business, the US carmaker said on Monday.

Its Ford-Werke German arm, which is burdened with 5.8 billion euros of debt, will continue a strategic transformation, focusing on reducing costs and increasing competitiveness, Ford said in a statement.

The move comes as Europe's car sector is battling high costs, weak demand and rising competition from Asian rivals, forcing plant closures and job cuts at a time when the United States is considering tariffs on auto imports.

Ford is already cutting thousands of jobs in Europe, many of them in Germany, where domestic giant Volkswagen has also been struggling.

"By recapitalising our German operations, we are supporting the transformation of our business in Europe and strengthening our ability to compete with a fresh product portfolio," said John Lawler, vice chair of Ford Motor Company.

"To build a sustainable business in Europe, we also need to continue to simplify our governance, reduce costs and drive efficiencies."

Slower than expected adoption of electric vehicles in Europe prompted Ford last year to be more flexible about a previous goal for all of its European production to be EVs by the end of the decade.

The new funding commitment includes a capital injection to address overborrowing at Ford-Werke and provide funding for a multi-year business plan.

It also replaces an agreement that Ford would cover any losses of the German subsidiary, a deal that had been in place since 2006, drawing protests from the powerful IG Metall labour union.

Without the agreement, Ford's German unit "could become insolvent in the coming years if the economic situation does not improve and the parent company in the USA is no longer able to offset the losses", IG Metall said.

Ford's Lawler called on European policymakers to establish a clear agenda to promote electric vehicles and bring emissions targets in line with consumer demand.

REUTERS

Ford vehicles are displayed at the New York International Auto Show Press Preview, in Manhattan, New York City, U.S., March 27, 2024. REUTERS

Ford to inject up to HK$37 billion to shore up cash-strapped German unit