"I can't say that I see major signs of an uptick, but it does feel like it's running at the bottom," said Stephen Odell, Ford of Europe CEO, according to Automotive News.
You know it has been a rough time period when a quote like that is exciting news for most Ford (NYSE:F) and General Motors (NYSE:GM) investors. That's the situation in Europe, and finally investors can see the light at the end of the tunnel. Let's take a closer look at the dismal situation that that the auto market in Europe is in, and see what moves Ford has made that will give it an edge to profit sooner than competitors.
Black hole for profits
Ford predicts 13.5 million vehicle sales in the 19 countries of western Europe, which is an improvement over last year but a long way from its peak of 18 million units sold in 2007 – a number Europe may never reach again. Ford recently narrowed its loss expectations from $2 billion to $1.8 billion this year, but has only lost $810 million through the first six months; leaving a chance that it could beat estimates for the full year.
That $1.8 billion is purely bottom line, lost profit; it's a substantial number when you consider that Ford reported a net income of $5.6 billion last year. Now you can understand why investors cheer to see the bottom of vehicle sales in Europe, and look forward to simply breaking even! Recently Odell told reporters that Ford expects to post a full-year profit in 2015. That may seem like a difficult goal to accomplish, but Ford has a few tricks up its sleeve.
When it comes to Ford's production capacity in Europe, less is more. Less capacity means more profitability, for now. Odell also said that Ford's move to take out 18% of European capacity should leave it well-positioned, according to Automotive News. The less is more theme doesn't hold true for Ford's next trick, upping the amount of models it's introducing into the region to boost sales and market share. Ford will be adding at least 25 new Ford models into Europe over the next five years, up from the 15 models previously announced. All that's great news for long-term investors, but for the short-term-thinking Wall Street it's all about "What have you done for me lately?"
Ford's August vehicle sales in Europe rose 2.3% while the total industry fell by 5.7% – meaning that Ford continues to gain market share from competitors. Better yet, that marks the fifth consecutive month of total share increase for Ford. The folks at the Blue Oval aren't slowing down either, as launches of the Transit connect, Tourneo Connect, and EcoSport happen later this year. Even better than Ford's total share increases was its retail share.
"This was Ford's best August and August year-to-date figures since Ford started tracking retail share in 2010, and August also marked the seventh consecutive month of retail share increase for Ford," said Roelant de Waard, vice president of marketing, sales, and service, Ford of Europe, in a press release.
It's no surprise that as losses in Europe begin to bottom out and look to turn a profit in 2015 that investors are jumping aboard the Ford train – sending the stock price up 35% year to date and over 70% for the last year. As Ford gradually reverses its losses in Europe, and the U.S. continues to surge, it should lead to a very solid investment opportunity – especially if Ford can export this success to China.
Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. 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.