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Ford Europe Expects Relief From Russia Sales Pressure In 2015

“In Europe it has been a stagnant, slow recovery, definitely slower than we thought”

Ford Europe said it had to defer its break-even target and almost halve its profit outlook because of problems in Russia, and the market here failing to recover as quickly as expected.

But the Russian market should bottom out in 2015, and start growing again thereafter, said Barb Samardzich, chief operating officer and vice president, Ford of Europe.

Earlier this month Ford Motor Co in the U.S. slashed its profit forecast for 2014 to $6billion from a $7billion to $8billion range included news that Ford Europe would lose about $300 million this year in Russia. The company also put back the forecast of breaking even in Europe by 2015, and cut the 2020 Europe profit target of six to eight per cent down to three to five per cent.

Things aren’t going according to plan for Europe’s car makers.

The turmoil in Ukraine has coincided with a weakening of the European economy which has spooked consumer confidence. This was supposed to be the time for a celebration of the end of the Great Recession after sales reached a 20-year low last year. Now speculation centers on whether this is a stutter on the way to recovery, or a sudden turn for the worse.

Ford Europe made its first profit in the second quarter of 2014 since 2011, with commentators saying it looked set fair on the road back to profitability as it benefitted from tough decisions to shut down some production. Ford has removed 18 per cent of European capacity including the closure of a commercial vehicle plant in Britain and a car assembly plant in Genk, Belgium..

Ford Europe made $14 million in the second quarter compared with a loss of $320 million in the same period of 2013. But this turned into a third quarter loss of $439 million compared with a loss of $182 million a year earlier. Ford Europe last made a profit in the second quarter of 2011, with $176 million.

“In Europe it has been a stagnant, slow recovery, definitely slower than we thought,” Samardzich told a press briefing in London.

Predictions for sales growth in Europe for 2014 range from about three to five per cent.

“It was disappointing to have to change our outlook for profitability,” Samardzich said.

She hoped Russia would bottom out and start growing again in 2015.

Russia was supposed to be the next big thing for car makers, but recent sanctions because of problems in Ukraine, and the sagging economy, means these hopes remain firmly on the backburner. The Russian car market fell almost 25 per cent in July and August and contracted 12 per cent in the first eight months of the year.

Samardzich said she had high hopes for Ford Europe’s transformation plan, and the company recently revealed an adventurous schedule for its product line-up, including the introduction of the Edge SUV for the first time. Ford will sell the Edge here in 2015, and the storied Mustang sports car.

Ford is also about to launch the new Mondeo sedan (Fusion in the U.S.) which is going on sale next year after a two year delay. Ford has also face-lifted its Focus small sedan and renewed the S-Max minivan.

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