Ford Motor Company's European Turnaround Continues

Sales are up as Ford works to end years of losses in Europe.

Jun 17, 2014 at 6:33PM

Ford

The Fiesta is Ford's best-selling model in Europe. Sales are up 10% this year through May. Source: Ford Motor Company

Ford (NYSE:F) said on Tuesday that its sales in Europe have risen 7.7% through the first five months of 2014, outpacing the overall market.

This is good news for Ford, which is aggressively working to turn around its European operation. Ford lost about $1.6 billion in Europe last year, and even more in 2012. 

But Ford's restructuring efforts look to be taking hold. Is a return to profitability finally in sight?

Strong growth for Ford's commercial vehicles
Ford's sales in Europe were actually down a bit in May, but as the company points out, May of last year was a little unusual. 

A work stoppage at a Ford factory in Belgium had constrained supplies of large cars for months, and May 2013 was the month in which Ford's European dealers finally had Mondeos and S-Maxes to sell after the labor dispute was resolved, so sales were up more than they might have been.

It was still a solid month for Ford, though. Sales of Ford's commercial vehicles were up 12.8%, giving the company a 10.2% share of the European commercial-vehicle market for the year to date.

Commercial vehicles -- vans and light trucks -- are a key part of Ford's business in Europe, just as they are in the U.S. (and in China, too). While these are technically "fleet sales", they're the good kind of fleet sales, steady and solidly profitable -- and Ford is always looking to expand its share of these market segments, all around the world.

Ford Transit

Ford's new Transit van is the backbone of its commercial-truck fleet in Europe. Sales have been strong. Source: Ford Motor Co.

Ford doesn't sell its big F-Series pickups in Europe. But it does sell (a lot of) its Transit and Tourneo lines of commercial vans, as well as the smaller Ranger pickup, which Ford still makes for overseas markets. Increasing sales of those vehicles is one key part of Ford's European turnaround plan.

New models are helping to boost retail results
Another part of the plan involves increasing profitable retail sales, while rolling back the less-good kind of fleet sales, those to rental-car fleets. As we've seen with Ford's efforts elsewhere, retail sales (and Ford's profits per sale) have been helped by the company's much-improved global lineup.

The Fiesta and the Focus are Ford's best-sellers in Europe, and they're the same models that do so well for Ford in the U.S. and China and other parts of the world. They were joined last year by the Kuga, the SUV that Americans know as the Escape, which is up 37% so far this year. Late this year, Ford's European dealers will start to receive the all-new Mondeo, the car we know as the Fusion.

The Fusion has been on sale in the U.S. for over a year and a half, but its arrival in Europe has been delayed by labor politics. Ford's factory in Genk, Belgium, currently makes a sedan called the Mondeo -- but it's an older model, unrelated to any U.S. Ford product. 

Mondeo

The current European Ford Mondeo sedan is an older model. It'll be replaced by the all-new Mondeo, a twin to Ford's Fusion, late this year. Source: Ford Motor Co.

That factory is set to close at the end of this year -- another piece of Ford's restructuring plan. But it needs something to make between now and then. Rather than spend hundreds of millions of dollars retooling it for the all-new model, only to have it close after a short production run, Ford decided to delay the launch of the Fusion's sibling in Europe until the Belgian factory was closed -- at which point, production of the all-new Mondeo will begin in Spain.

The upshot: The turnaround plan is on track
In the last few months, Ford executives have been optimistic about the chances of turning a profit in Europe in 2015. Chief Operating Officer (and incoming Ford CEO) Mark Fields told me that it was "absolutely on track" when I spoke to him in April, and was very upbeat about the company's progress to date.

That's a welcome development for Ford shareholders. Even breaking even in Europe would represent a gain of $1.6 billion over last year's results -- a boost that would have added nearly 19% to Ford's 2013 pre-tax profits. 

That wouldn't be bad at all for Ford's share price. Can they get it done? It's looking good so far.

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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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