FRANKFURT, Germany: Ford announced this week that it will inject up to $4.8 billion into its struggling German unit to stabilize its European business.

The move comes as Ford-Werke, the automaker's German subsidiary, faces mounting financial pressure with 5.8 billion euros in debt.

Ford said the investment would support its ongoing strategic transformation, focusing on cost reduction and improving competitiveness. The European automotive industry is grappling with high production costs, weakening demand, and increasing competition from Asian manufacturers, prompting plant closures and job cuts.

Meanwhile, the U.S. government is considering tariffs on auto imports, adding further uncertainty.

Automakers are already reducing thousands of jobs across Europe, including significant reductions in Germany. Domestic rival Volkswagen has also been struggling under similar pressures.

"By recapitalizing 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."

Ford has adjusted its stance on electric vehicle (EV) production in Europe. Last year, it acknowledged that the slower-than-expected adoption of EVs necessitated a more flexible approach. The company had previously committed to making all of its European production fully electric by the end of the decade.

The new funding includes a capital injection to address overborrowing at Ford-Werke and to finance a multi-year business plan. It also replaces a long-standing agreement requiring Ford to cover any losses incurred by its German subsidiary, a policy in place since 2006. The removal of this agreement has drawn criticism from IG Metall, Germany's influential labor union.

Without continued financial support, 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 warned.

Lawler also urged European policymakers to adopt more transparent policies to encourage EV adoption and to align emissions targets with consumer demand.