Ford Motor Company (NYSE:F) said that its sales in Europe's key markets rose 2.2% in the fourth quarter of 2019 as dealers pushed to clear out stocks of the Kuga SUV ahead of the launch of an all-new model.
For the full year, Ford's sales in the region were down 1.4%.
The raw numbers
Ford reports several sets of sales results for its European operation. For shareholders in the automaker, the most important number is what it calls the "Euro 20," which includes sales in the 20 countries in Western and Central Europe that Ford thinks of as its principal markets in the region. But it's also worth looking at results for the "Euro 50," Ford's term for all of Europe, including Eastern Europe, Russia, and the former Soviet republics.
|Region||Q4 2019 Sales||Change vs. Q4 2018||2019 Sales||Change vs. 2018|
Ford's fourth-quarter results trailed both markets' overall gains. Total new-vehicle registrations in the Euro 20 rose 8.5% in the fourth quarter from a year prior, and were up 7.8% in the Euro 50. For the full year, registrations rose 1.3% in the Euro 20 and 0.4% in the Euro 50.
What's working for Ford in Europe
Here are the results for Ford's six best-sellers in the Euro 20 in the fourth quarter.
|Vehicle||Q4 2019 Sales||Change vs. Q4 2018|
What do those numbers tell us?
- A whole lot of Kugas: Here in the U.S., Ford has been rolling out an all-new version of the compact Escape SUV for 2020. The Kuga is the Escape's European twin, and an all-new model is set to roll out in Europe in the first quarter. Ford's European dealers spent Q4 clearing out their stocks of the old model, offering deals that made it Ford's best-seller in the region for the period.
- Fiesta and Focus sales slipped: Demand continued to be strong for Ford's longtime European stalwarts, the small Fiesta and compact Focus, but sales of both were down from a year ago. Cause for concern? Not necessarily: The Kuga selldown probably cannibalized sales of both cars to some extent.
- Mixed results for Transit vans: Ford Europe has put some marketing muscle behind its Transit Custom, a midsize version of its familiar Transit commercial van, and the results have been very good. But sales of the full-size Transit suffered a bit in Q4. That's worth noting, as commercial vehicles are a key part of Ford's plan to boost its profit margins in Europe.
What does this mean for Ford's fourth-quarter earnings?
A year ago, Ford announced a comprehensive "redesign" plan for its European business, which included job cuts and changes to its product portfolio and manufacturing. It posted profits in Europe in the first and second quarters of 2019, but -- take note -- it slipped to a loss in the region in the third quarter despite a year-over-year sales increase.
How did Ford Europe boost sales and still lose money? The company books revenue when vehicles get shipped to dealers, not when they're sold. Its third-quarter sales were strong because dealers were selling down inventories -- a trend that appears to have continued into the fourth quarter (with the Kuga).
So what does this mean for earnings? I expect Ford Europe's result to be an improvement year over year -- Ford lost $199 million in Europe in the fourth quarter of 2018 -- but I won't be surprised if it's another loss as the makeover continues.