Is Ford (NYSE:F) getting closer to making a profit in Europe?
Like most automakers doing business in recession-ravaged Europe, Ford has posted big losses in the region recently. Ford Europe lost a whopping $1.75 billion last year, and back in January the automaker warned that it could lose even more this year -- $2 billion.
But things have improved more quickly than anticipated, and Ford now says that it will lose less in 2013 than it did in 2012. Still, a profit seems a long way off -- or is it? In this video, Fool contributor John Rosevear looks at the state of Ford's turnaround effort in Europe, and explains why a top Ford executive recently said that profits in Europe are now "within reach".
An abbreviated transcript of the video:
Hey Fools, it's John Rosevear. So is Ford getting closer to a profit in Europe? Ford of course has lost big bucks in Europe over the last couple of years. Ford Europe lost $1.75 billion last year, and back in January the automaker warned that it could lose $2 billion this year. But things have improved more quickly than anticipated, and they've since improved that guidance, now saying that they'll lose less in 2013 than they did in 2012. And it's not because Europe's car market has improved, it really hasn't. New-vehicle sales in Europe continue to be near 20 year lows. But the turnaround plan that Ford launched in the fall of 2012 is already starting to do some good. Ford Europe chief Stephen Odell recently told Reuters that Ford's goal of turning a profit in Europe in 2015 is now within reach. Part of the reason is that Ford is in the process of launching a whole bunch of new models, expanding its lineup in Europe to capture sales it wasn't previously competing for. That has allowed Ford to post some retail sales growth, and retail market share growth, even while the overall market has continued to be lousy. Ford now says there will be 25 new or refreshed models for Europe over the next five years. The next all-new model coming to Europe is the EcoSport SUV. This is a subcompact SUV, it shares a platform with the Fiesta, that'll give you an idea of its size, and Ford makes it in a plant in India and will export it from India to Europe, as an entry-level affordable SUV. It'll arrive in Europe early next year, and later in the year Ford will bring the all-new Mustang to Europe. Odell says that the Mustang isn't coming to Europe to rack up massive sales numbers, it's more about boosting Ford's image, making the brand more appealing to a wider audience. But Ford still has more work to do in Europe, along with all of those new product launches. There are significant cost cuts under way. Ford is closing a plant in Belgium next year, which will eliminate over 6,000 jobs. The costs associated with that will cost Ford $400 million just in 2013, but Odell says that the annual savings should be at least that much once the plant is closed. Ford already closed two smaller plants in the UK earlier this year. Long story short, look at it this way. Ford made $8 billion before taxes in 2012. If Europe had just broken even, that would have been almost $10 billion. When we look back in a few years on Ford's profits from 2012 to 2015, we're going to see a big increase just from this Europe restructuring. So good news for Ford shareholders here as this effort looks to be very much on track. Thanks for watching, and Fool on.
Fool contributor John Rosevear owns shares of Ford. You can connect with him on Twitter at @jrosevear. 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.