Ford Says Europe Cuts are Enough as Market Stabilizing
Ford Motor Co. (F), targeting an end to losses in Europe, sees signs that demand is rebounding in the region and doesn’t plan more reductions in plant capacity there.
“We’re at the point where we have no more capacity announcements to make,” Stephen Odell, Ford’s Europe chief, told reporters yesterday at the company’s headquarters in Dearborn, Michigan. “We’ve always said, though, that we’ll monitor the situation and if there were more catastrophic, as-yet-unpredicted changes, we would react to them. We feel that we’ve taken appropriate action.”
Ford still plans to break even in Europe by 2015, Odell said. The automaker’s sales in its 19 main markets in Europe rose 6.4 percent in June, outpacing a 6.5 percent industrywide decline. That performance boosted Ford’s market share to 8.2 percent from 7.2 percent a year ago, the company said.
Ending the European deficit is one of Chief Executive Officer Alan Mulally’s major challenges. Ford relies on its profitable North American operations and is looking to diversify its earnings. The automaker has forecast its annual loss in the region will widen to about $2 billion this year from $1.75 billion in 2012.
The European industry sales rate in June may have risen to 13.8 million in June, Odell said, a pace that would exceed Ford’s full-year forecast for as many as 13.5 million deliveries. The industry is “starting to show signs of stability,” he said.
“Our prediction would be that we’re at or close to the trough,” Odell said. “We don’t see any further decline at this point.”
Ford rose 0.8 percent to $17.11 at the close in New York. The shares have climbed 32 percent this year, outpacing an 18 percent rise in the Standard & Poor’s 500 Index.
Ford is introducing new models such as the EcoSport compact sport-utility vehicle in Europe to help reduce its reliance on low-margin sales to rental-car companies and dealer self-registrations. It also wants to boost the proportion of higher-profit sales to retail and company-fleet buyers.
The company plans to lower its share of deliveries to rental fleets to less than the European industry’s 13 percent average by early 2015 from 17 percent now, Roelant de Waard, the U.S. company’s head of sales for the region, said last month in an interview.
On the cost side, Ford said in October that it planned to shutter three factories in Europe by the end of 2014 and cut 6,200 jobs, or about 13 percent of its workforce in the region. The moves will reduce Ford’s annual production capacity by about 350,000 vehicles, or 18 percent, Odell said yesterday.
“The plan is really starting to work for us, and we’re now starting to see the external metrics that demonstrate that,” Odell said. Ford has reduced inventories in Europe by at least 10 days supply since it began paring production in 2012’s fourth quarter, he said.
Protests related to the Genk shutdown disrupted supply at the factory, contributing to sales declines earlier this year. Through the first six months of 2013, Ford’s sales in its top 19 European markets fell 8.3 percent to 565,400 vehicles, compared with a 7.1 percent industrywide drop, the company said.
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