Ford Europe was slow to understand the consumer craze for SUVs and growing losses, but experts are divided on whether the company should follow General Motors and pull out of the region. According to Peter Schmidt, editor-in-chief of the highly regarded Automotive Industry Data (AID) European bulletin, Ford Europe is a solid company with the most prized jewel of the crown – a very profitable van business. Professor Ferdinand Dudenhoeffer of the Center for Automotive Research (CAR) at the University of Duisburg-Essen, Germany, said Ford Europe did not have the capacity to compete with major European car and SUV manufacturers and may have to sell this part of the operation. Opportunity to collaborate with Volkswagen on small utility vehicles is timely, as Ford’s vans business and VW’s electricity expertise would allow businesses to take advantage of the expected explosion of battery-powered urban delivery vehicles. The small city Ford Fiesta is a great success, while the company just spent a lot of money for the launch of the new Ford Focus, which competes with the small family car market, the VW Golf.
Ford in financial difficulties
Ford Europe lost $ 245 million in the third quarter, compared with $ 192 million in the same quarter last year. Ford is said to make made considerable losses in 2018, after a profit of $ 234 million in 2017. Ford Motor announced in July that it would spend $ 11 billion on a three to five-year global restructuring program. Europe should see the bulk of the action with significant job losses. Last week, Ford Europe announced it had reshuffled its leadership in anticipation of the expected transformation of this loss-making organization. Ford Europe said it wants to focus on for-profit SUVs and vans and reduce deficient vehicles. Ford discussed collaborative projects with Volkswagen, which so far focused on vans. This could be extended to electric and autonomous vehicles. In a report, investment bank Morgan Stanley said it valued Ford Europe at a negative $ 7 billion, against a previous estimate of less than $ 5 billion. Ford Europe is expected to post a cumulative loss of $ 3.6 billion from 2019 to 2021 with additional losses each year. By 2021, its Adjusted PBIT margin of Ford Europe is negative by 4.5%, which would make Ford the least profitable manufacturer in this market, according to Morgan Stanley. This dark and charged future has prompted Ford to follow the example of General Motors and to seek to withdraw completely from Europe. GM sold its European operations Opel and Vauxhall to the French group PSA at the price reversed in 2017 after losing nearly 20 billion dollars.
SUVs And Vans – the road to redemption
Things are far from being so bad for Ford Europe, and Mr. Schmidt of AID said that despite some missteps, Ford should cling to its European offspring. Schmidt said that Ford was slow to understand that its very successful sedan, the Mondeo, was reducing in sales because of its new SUVs, but the Fiesta is a long-term success and even though it is a cheap car running in a sector where margins are thin, it still makes small profits. The Fiesta also plays an important role in Ford’s fierce fight to comply with the European Union’s 2021 energy efficiency rules. The cooperation talks with VW, which would also concern autonomous cars and electric cars, are taking place. An agreement on vans with VW is a godsend for Ford, which is very strong in light commercial vehicles. According to AID, in 2017, Ford sold just over 410,000 vans in Western Europe and about 400,000 other VW’s much larger. VW and all its brands have a global market share of around 25% in Europe, compared to 6.4% for Ford. Combining VW’s power of electrification with Ford’s expertise in van manufacturing is a very promising sign.