Ford Motor Company Takes Another Step to Reverse Its Biggest Problem

Ford marks its fifth successive month of market share gains in Europe.

May 18, 2014 at 4:15PM

Ford
Ford headquarters in Dearborn, Mich. Source: Ford.

To say operations in Europe have been difficult would be an understatement for most automakers, especially Ford (NYSE:F). America's second-largest automaker has lost $3.4 billion in its Europe operations over the past eight quarters. Ford just released April sales results for Europe which showed further progress toward profitability on the continent. Here are the details, as well as a look at the big picture.

By the numbers
April was the 11th consecutive month in which Ford posted year-over-year sales gains in Europe. It also marked the fifth successive month of market-share gains for the Blue Oval.

Ford nearly sold 100,000 vehicles last month in its 20 main European markets. That was a 6.6% improvement from last year's sales level and it put more distance between Ford and the rest of the industry, which posted a slower growth rate of 4.2%. Ford's April performance boosted its market share in Europe by 20 basis points to 7.9%.

Fie

Ford's 2014 Fiesta has been a global powerhouse. Source: Ford.

The Fiesta remained Ford's best-selling car in Europe, and reached 29,000 registrations to post its best April performance since 2010. While the U.S. has been forced to live without new models of the Ford Ranger, that hasn't stopped the midsize pickup from being named the international pickup of the year following extensive testing at Millbrook Proving Ground in Bedfordshire, England; the Ranger recorded 1,700 sales which is the mid-size truck's best-ever April sales result since its Europe debut in 1999.

Earlier this year, Ford noted that roughly 43% of its sales in Europe were all-new or significantly refreshed models. Ford's sales through the first four months in Europe were up 10% to nearly 400,000 units. Management's dedication to taking significant losses but continuing to launch newer models has paid off with market share and revenue gains -- a trend that should continue.

The big picture
April was another step in the right direction for Ford, which remains on track to break even, or dare I say turn a small profit, in Europe next year. Recent first-quarter results showed metrics improving across the board compared to last year.

Ford
Graph by author. Source: Ford 10Q.

In addition to Ford's pre-tax loss coming in at $194 million, which was less than half of last year's first-quarter loss, its operating margin improved by 400 basis points. As previously mentioned, Ford's new models are helping drive revenue higher as well: the company's first-quarter revenue in Europe was up a significant 18%, or $1.2 billion. Despite auto sales in Europe hitting a two-decade low in 2013, Ford's situation is improving and management continues to express confidence regarding the company's future in the troubled region.

"The good news is we are seeing, not only the market actually growing a bit, but our performance -- our share was up again in the first quarter and we're adding production," according to Mark Fields, Ford's incoming CEO. "We're starting to see our plan be effective."

Final thoughts
Ford is in the middle of its product cycle refresh that aims to release 25 new or replacement models in Europe over the next five years. In addition to a fresh lineup that will continue to drive sales and revenue higher, the automaker is focusing on more healthy sales -- those to retail consumers and fleets -- which will help improve margins and profitability. Make no mistake, Ford's operations are quickly turning around in Europe, so investors won't have to suffer through the region's drag on profit much longer.

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Daniel Miller 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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