Ford Motor Company (NYSE:F) said that its sales in Europe's key markets rose 3.1% from a year ago, outpacing the overall market's gain, on strong sales of SUVs and commercial vehicles.
Through September, Ford's sales in the region were down 2.4% from the same period in 2018.
The raw numbers
Ford reports several sets of sales results for Europe. For Ford investors, the most important number here is what Ford calls the "Euro 20," the 20 countries in western and central Europe that Ford thinks of as its key markets in the region. It's also worth looking at results for all of Europe, including the countries of eastern Europe, Turkey, Russia, and the former Soviet republics. (Ford refers to the larger group as the "Euro 50.")
|Region||Sales in Q3 2019||Change from Q3 2018|
Overall new-vehicle registrations in the Euro 20 rose 2.2% in the third quarter from a year ago, and were up 1.6% in the Euro 50.
What's working for Ford in Europe
Here are the result for Ford's six best-sellers in Europe in the third quarter of 2019.
|Vehicle||Sales in Q3 2019||Change from Q3 2018|
What do those numbers tell us?
- This was a good quarter. Not only did Ford's sales growth in the Euro 20 outpace the overall industry's, but Ford's "mix" was also strong. Higher-trim models accounted for 76% of Ford's passenger-vehicle sales in the quarter, up from 71.8% a year ago.
- Europeans like SUVs too. Sales of all three of the SUVs in Ford's European lineup -- EcoSport, Kuga, and Edge -- rose year over year. (Sales of the Edge rose 18% to about 2,600.) Note that the Kuga is the European version of the U.S. market's Escape.
- Cars are still very important in Europe. Ford isn't selling the all-new Fiesta and Focus in the United States, but both are alive and well in Europe. Note that the big jump in sales of the Focus (and probably some of the Fiesta's decline) is because the then-all-new Focus was in short supply in the third quarter of 2018. Also note that size matters: Sales of the one-size-up Mondeo (the Fusion's European twin) fell 10.6% to about 11,000.
- The Transit commercial vans continue to compete well. Sales of Ford's Transit family of commercial vehicles fell slightly from last year, but sales were strong enough to ensure that Ford remained Europe's top-selling commercial-vehicle brand as of the end of the third quarter. (Sales of the small Transit Connect van rose 20.4%, to about 13,600.)
What does this mean for Ford's third-quarter earnings?
Back in January, Ford announced a restructuring plan for Europe, after Ford Europe lost $245 million in the third quarter of 2018. The plan includes job cuts, a consolidation of headquarters functions, cost reductions in manufacturing, and an overhauled product lineup.
The plan has already had an effect: After three consecutive money-losing quarters, Ford Europe returned to profitability in the first and second quarters of 2019, even though its sales in the Euro 20 were down 4.8% over that period.
So what should we expect when Ford reports its third-quarter earnings on Oct. 23? Ford is unlikely to report a huge profit in Europe this time around. But I think the restructuring effects, plus Ford's improved mix year over year, should have been enough to put it in the black. A small profit (around $50 million, give or take) seems likely.