A Fiesta in Europe for Ford Motor Company

Ford's Fiesta leads the way to a strong month in Europe.

May 20, 2014 at 6:15PM


Ford's Fiesta was Europe's best-selling small car in the first quarter of 2014. Sales were up again in April. Source: Ford Motor Company  

It's looking like Fiesta time for Ford (NYSE:F) in Europe.

Ford said last week that its sales in Europe rose 6.6% in April, a gain that outpaced the overall market's growth.

While auto sales in Europe continue to be sluggish, Ford has now outpaced the market -- and gained market share in Europe -- for five months in a row.

That's a sign that Ford's restructuring plan for Europe is on track, says Fool contributor John Rosevear in this video. As John explains, Ford has lost billions in Europe over the last couple of years -- but a strong turnaround plan is in progress, and there are more and more signs that the company's Old World operation is headed in the right direction. That's good news for Ford investors.

A transcript of the video is below.

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John Rosevear: Hey Fools, it's John Rosevear, senior auto specialist for Fool.com. Ford said on Wednesday that its sales in Europe were up again in April.

Ford's European sales rose 6.6% in April, beating the overall market's 4.2% growth, it said. That's 11 months in a row where Ford has reported year-over-year sales growth in Europe, and the fifth straight month in which it has gained market share. It's a sign that the very depressed market for new cars in Europe really is recovering from the 20-year lows we were seeing a year ago.

And those market share gains are also a sign that Ford's turnaround plan for Europe is going in the right direction. Ford has of course lost a ton of money in Europe over the last few years, about $1.6 billion dollars last year and a little more than that in 2012. But in October of 2012, CEO Alan Mulally announced a restructuring plan for Europe that was intended to get the company back to break-even by 2015, and it's on track.

It's a plan that draws a lot from the strategy that Mulally and his soon-to-be successor, Mark Fields, used to turn around Ford's North American division, it combines cost cuts with improvements to the product line. Those cost cuts are pretty much a done deal at this point. Ford closed a couple of factories in the U.K. last year and is winding down a big plant in Belgium that will close at the end of 2014.

There will be some more one-time charges to Ford's earnings related to that Belgian factory closing, probably another $400 million-$500 million dollars spread over the next three quarters, but it'll be wound down by the end of the year, Ford CFO Bob Shanks told me.

Meanwhile, Ford is expanding its retail product line. For a long time it only offered a few models in Europe, but now it's adding more models from its global product portfolio.The idea is that Ford can increase overall sales by competing in market segments it hasn't been in before.It's a good plan and the fact that Ford has the products to draw on makes it an affordable one.

It's also pushing to gain ground in the commercial fleet segment, something it does very well here in the U.S., and it said on Wednesday that its commercial vehicle market share in Europe is now up to 10.2%, its highest level since 1998. Ford offers a full range of commercial vans in Europe, right down to a very tiny Fiesta-based model, and it also offers its midsize Ranger pickup. European sales of the Ranger aren't huge, but they're growing.

But the Fiesta remains Ford's big seller in the Old World. It was Europe's best-selling small car in the first quarter, and sales were up almost 14% again in April. So another good month for Ford in Europe, and it looks like they're still on track to break even or maybe even turn a profit in the region next year. 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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