It isn't getting any better for Ford (NYSE:F) in the Old World: Ford's European branch posted a sobering 27% year-over-year sales decline for December, as market conditions in the region continued to be grim.
Ford's decline was steeper than some of its major rivals' – notably market-leader Volkswagen (NASDAQOTH:VLKAY), which saw sales drop 14.5% – as the Blue Oval's reluctance to offer deep discounts continued to cost it with bargain-hunting consumers.
Ford wasn't alone: General Motors' (NYSE:GM) decline was as steep as Ford's. And at least for Ford, there were a few bright spots of note.
Small bright spots in a big grim picture
Ford's PR folks did the best they could with the bleak news, and they managed to point out some legitimate bright (or at least not quite as dark) spots for 2012 as a whole:
- Ford held on to second place for the year. Ford was Europe's second-best-selling car brand in Europe in 2012 for the fifth year running, trailing only VW.
- A gain in the U.K. Sales in the United Kingdom were up 3% over 2011. (In the context of Europe, that's a huge increase.) Ford continues to be the best-selling car and commercial vehicle brand in the U.K., positions it has held for decades.
- Russia continues to be a bright spot for Ford. Sales were up 10.8% in 2012, paced by the hot-selling Focus compact, which Ford builds locally at a factory near St. Petersburg. Russia is now Ford's third-largest European market, after the U.K. and Germany.
Of course, the overall picture is still brutal, though Ford is mostly holding its own: Market share for the 19 countries Ford counts as "Europe" was 7.9% for the year, down 0.4 percentage points. Still, with the overall European auto market at its lowest levels since 1995, that's faint praise.
When Ford announces its full-year 2012 financial results later this month, it's widely expected that losses in Europe will total roughly $1.5 billion for the year. Worse, Ford said back in October – and reiterated this week – that those losses aren't going to end anytime soon. The company expects 2013's bottom-line results to look a lot like 2012's.
Already, though, Ford is laying the groundwork for a solid recovery.
A turnaround is unfolding... slowly
Ford's plan for a return to profitability in Europe has several components, including factory closings and a marketing shift, but a big part of the plan involves new products. Unlike in the U.S., where Ford offers everything from small cars to big trucks, the company's European model lineup has traditionally been limited – essentially just a few cars and a couple of vans.
That's changing. Several new-to-Europe models drawn from Ford's global product portfolio are on the way, including the Edge SUV and the Mustang, as Ford seeks to capture incremental sales gains from product categories it hasn't traditionally contested in the region.
Ford is also planning to launch a bunch of new or heavily revised products in 2013, including updated versions of the Fiesta, the Transit commercial vans, and the Kuga (an SUV that is identical to the U.S.-market Escape), as well as the EcoSport, a small Fiesta-based SUV originally developed for emerging markets.
The upshot: Grim news will continue, but Ford's on the case
There's no way around it: 2013 is going to be ugly for Ford in Europe. Analysts expect overall European auto sales to fall again in 2013, and with Ford committed to restraint in the price wars that have caught up rivals like VW and Fiat, further sales declines seem all but inevitable.
Ford is taking a longer-term view, though. Avoiding steep discounts preserves the company's margins and pricing power – as well as residual values of Ford's cars as they age. While reducing production capacity to sustainable levels and expanding the regional product line will take some time to complete, the company's commitment to decisive action should be reassuring for shareholders – even as the losses continue for several more quarters.
Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.