Europe Is Looking Brighter for Ford Motor Company

Sales are finally rising. Will Ford's losses turn to profits soon?

Apr 15, 2014 at 1:05PM

Fiesta

High gas prices have made the Fiesta Ford's best-seller in Europe. Photo credit: Ford Motor Company

Like most of its competitors, Ford (NYSE:F) has had a rough ride in Europe over the last few years. Severe recessions in many key European nations drove new-vehicle sales to lows not seen in two decades -- and Ford, along with several rivals, lost billions.

But the European auto market is finally starting to pick up -- and Ford's sales are looking strong. In this video, the Motley Fool's John Rosevear looks at Ford's latest numbers from the Old World, and explains why the picture should continue to brighten for Ford in coming months.

A transcript of the video is below.

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John Rosevear: Hey Fools, it's John Rosevear, senior auto analyst for Fool.com. Ford announced on Tuesday that its sales in Europe rose 12% in March.

That was enough to give them an 11% gain for the first quarter. That's ahead of the overall market, which gained 10% in March and 8% for the quarter, so Ford gained market share. It was up to 8.9% in March, up two-tenths of a percent from March of last year.

These may sound like ordinary sounding numbers but Europe has been a big challenge for Ford and most of their rivals for several years now, so this is all actually very good news.

Ford is working hard to turn around its European operation, it lost $1.6 billion dollars in Europe last year, $1.7 billion the year before, but the company says it's on track to break even next year, and increasing sales and market share, especially in the retail and commercial vehicle markets, is one key part of how they're going to do it.

We have a habit of getting worried when automakers talk about fleet sales, because we associate the phrase "fleet sales" with low-profit sales to rental-car fleets. But Ford has been moving away from those kinds of sales in both the U.S. and in Europe, while continuing to go after commercial vehicle fleet sales.

That's things like work trucks and delivery vans, Ford considers that to be good profitable business and they compete hard for it. In the U.S. they do it primarily with pickups, but in Europe they sell a lot of vans, variations of the Transit van and the smaller Transit Connect vans, as well as the even smaller Transit Courier van and a commercial van version of the Fiesta hatchback, when you need something really small for your business. They also sell the Ranger pickup in Europe, in regular, super, and double cab versions.

And just as they are here, these commercial truck sales are a key part of Ford's business in Europe. Ford's commercial vehicle sales were up 10% in the first quarter, and Ford's share of the European commercial vehicle market was up to 10.4%, up two-tenths of a percentage point, they say that's their highest level since 1998. Meanwhile, sales to rental fleets were down as a percentage of total sales, so we like to see that.

Ford's top sellers in Europe continue to be the Fiesta and the Focus and the Kuga, in that order. Fiesta sales rose 7% during the quarter and we reported earlier in April that Ford had increased production of the Fiesta by 200 cars a day at its big plant in Cologne Germany, and they've been working extra weekend shifts.

The Kuga is the European version of the Escape, it replaced an old model that they made specifically for Europe. Sales were up 56% in the first quarter. Another part of Ford's turnaround plan is to expand their product lineup, they have 10 new models coming to Europe in 2014 and more next year, including for the first time the Ford Mustang, so they could continue to outpace the overall market for a while as they expand their offerings.

Long story short, the first quarter was great for Ford in Europe, and that means good news for Ford's profits over the long term. Thanks for watching.

John Rosevear owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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