Ford Motor Stays In Loss-Making Europe, For now.
“Everything is possible if we can’t get the reset done”
COLOGNE, Germany – Ford Motor’s loss-making European subsidiary will lay off thousands of workers and slash its model line-up to concentrate on profitable vehicles.
Ford said it will stay in Europe but if it can’t restore profitability, it may reconsider its position.
There had been speculation that Ford Europe would follow General Motors, which pulled out of the continent a couple years ago. GM’s Opel and Vauxhall subsidiaries had lost about $20 billion this century, and was taken over by PSA Group of France.
Ford Europe said its latest cost cutting and restructuring moves were part of the U.S. company’s $14 global reform plan.
Ford Europe chief Steven Armstrong said the company is accelerating key fitness actions and reducing structural costs. A fundamental redesign will include changes to Ford’s vehicle portfolio, expanding offerings and volumes in its most profitable growth vehicle segments, while improving or exiting less profitable vehicle lines and addressing underperforming markets.
“We are taking decisive action to transform the Ford business in Europe, We will invest in the vehicles, services, segments and markets that best support a long-term sustainably profitable business, creating value for all our stakeholders and delivering emotive vehicles to our customers,” Armstrong said in a statement.
Asked by the Financial Times if Ford would say in Europe long-term, Armstrong said nothing was guaranteed.
“Everything is possible if we can’t get the reset done,” he said.
Ford Europe lost $245 million in the 3rd quarter, compared with a loss of $192 million in the same quarter last year. Ford Europe has said it expects a 2018 loss, after a profit of $234 million in 2017.
Late last year Ford Europe said it reshuffled its leadership ahead of an expected shakeup. It said then it wants to concentrate on profit-making SUVs and vans and to cut loss-making vehicles.
Ford has been discussing collaboration plans with Volkswagen, which so far have centered on vans. This might be extended to cover electric and autonomous vehicles. An announcement is expected next week at the Detroit Auto Show.
The little Ford Fiesta city car is a big success story, while the company has just spent lots of money launching the new Ford Focus, which competes with the market leading small family car, the VW Golf.
Ford said it aims to achieve labor reductions through voluntary employee actions.
Ford is establishing three customer-focused business groups in Europe – Commercial Vehicles, Passenger Vehicles.
Ford Europe said it is targeting a 6% EBIT (earnings before interest and tax) margin longer term, with returns in excess of the cost of capital for each business group. It gave no timetable for the aspirations.
Every Ford nameplate except the little Fiesta will include an electrified option.
Actions to cut costs and restore profitability will include ending production of the C-MAX and Grand C-MAX minivans in Germany. It gave no details of the fate of its current model line, which runs from the Fiesta, through the Focus and bigger Mondeo.
In a report, investment bank Morgan Stanley said it valued Ford Europe at a negative $7 billion, up from a previous estimate of minus $5 billion. Earlier, Morgan Stanley pointed to big forthcoming losses at Ford Europe.
“We forecast Ford Europe to post an accumulated loss of $3.6 billion from 2019 through 2021 with increased losses each year. By 2021, our forecast of Ford Europe’s Adjusted EBIT margin is negative 4.5% which we estimate would make Ford the least profitable (manufacturer) in that market,” Morgan Stanley said.
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