Car maker Ford is to cut 1,500 jobs at its huge Dagenham plant in Essex.

And the long-term future of the plant is still in doubt as Ford continues a review of its entire European operation.

The company has been looking to cut costs in Europe. Profits fell sharply last year from almost £200m to £29m, and there is considerable overcapacity.

The Dagenham job losses are bigger than expected - most observers had predicted cuts of about 1,250.

Production halved

One of the two assembly line shifts is to be ended from August, but volunteers for redundancy will be sought from among all 8,000 Dagenham workers.

"We believe the redundancy terms will be the best offered by the British manufacturing industry," said Ford Britain chairman Ian McAllister.

"We estimate they are around three times the level of the statutory redundancy terms."

Daily production of the Fiesta at Dagenham will be reduced from the present 1,200 to around 560 under the changes.

Ford of Europe chairman Nick Scheele said the company's financial performance was unacceptable.

Last year it had capacity for 2.25m units but sold only 1.7m.

"At a single shift and full five-day working, Dagenham will be able to handle the entire demand for right-hand units for the foreseeable future," said Mr Scheele.

"We believe this is the optimal way for Ford of Europe to address its overcapacity situation."

Over the past 18 months, Ford has closed some factories and reduced production at others in an attempt to deal with the problem.

But it was always suspected that the axe would eventually fall at Dagenham, which has been on short-time working for more than a year.

Transport and General Workers Union leader Tony Woodley warned Ford not to renege on a deal he said had been made with company bosses, guaranteeing a future for the plant.

"Two years ago we assisted by closing Halewood for Ford production, allowing them to spread their production costs across the rest of Europe," he told the BBC.

"Under those arrangements it was made clear this plant would have a a new model and future. We intend to make sure Ford honours those commitments."

Duncan Simpson of the Amalgamated Engineering and Electrical Union said: "Ford must now deliver concrete assurances over Dagenham's long-term future and show that this announcement is not a signal that the plant is being run down."

Dagenham recently saw thousands of its traditionally moderate professional staff vote for strike action - due to start next week.

White collar workers want the same pay settlement as that won by production line staff last year - 15% over three years and a cut in the working week. Ford has offered them 11% over three years.

Racism and bullying

There has also been industrial action in protest at what workers claim was racism and bullying at the plant.

The unofficial - or so-called wildcat - strikes cost Ford production of 1,200 Fiesta models worth up to £12m at showroom prices.

But Mr Woodley denied the disputes may have contributed to the decision to cut jobs.

"This is not an industrial relations problem in the main - it's about overcapacity," he said.

A meeting between management and unions at Dagenham is expected to take place later on Friday.

Motor industry expert Professor Garel Rhys, from Cardiff University, warned Dagenham's future would be tied to the success of the new Fiesta due out in about two years' time.

He said it now appeared that Ford's plant in Cologne, Germany, would be the lead location for the Fiesta, with Dagenham as the secondary base.

The spate of industrial action was likely to have worried Ford bosses in the US, who, he said, remain wary of industrial relations problems in the UK despite the significant improvements during the 1990s.

Nick Scheele acknowledged this had been a concern.

"The real issue is one of supply and demand but it would be foolish to deny the fact that it is not exactly helpful to see a situation involving salaried staff or production workers in disputes at Dagenham," he said.

But he added that despite the cutback, Ford would continue with its substantial investment plans for the UK.

These include a new engineering complex at Dunton in Essex, a London-based design centre and investment in Dagenham's engine plant, which is the company's sole European source of diesel engines.