Equipped with a very fresh lineup of tech-laden, efficient, fun-to-drive, and otherwise class-leading vehicles coupled with newfound cost efficiencies, Ford’s progress in North America is undeniable. The region enjoys healthy profit margins that were once only imaginable on low-volume luxury cars — and these impressive results are expected to shine bright when Ford reports its Q3 2013 earnings on October 24th.
But not all of Ford’s operating units will be as illustrious as North America, as the situation for Ford Europe is significantly different: The Blue Oval has been consistently unprofitable in the region and will remain that way until at least 2015. But that doesn’t mean that the automaker isn’t doing anything to change that.
Due to a deep recession that has resulted in a weak new car market, Ford lost over $1.7 billion in Europe in 2012, and will likely lose just as much in 2013. This has prompted CEO Alan Mulally to launch a restructuring plan that aims to bring Ford Europe back to profitability by the end of 2015 — similar to what’s happening with the European operations of rival General Motors. The plan’s objective is to restructure the business so that it is sustainably profitable over the long term, no matter the level of car sales. If all of that sounds familiar, that’s because the plan is nearly the same that the automaker employed when overhauling its U.S. operations years ago.
Specifically, the plan for Ford of Europe involves closing factories, cutting various organizational costs, making changes to marketing, and introducing new product. The product strategy is specifically interesting since it calls for an expansion of the automaker’s lineup in Europe, one that has traditionally been fairly limited in models. In that regard, The Blue Oval has begun offering SUVs from its global model line as well as the all-new 2015 Mustang that will make its hotly-anticipated debut in December. For their part, the new SUVs are helping Ford increase sales by conquesting customers, thereby bringing Ford incremental business in the face of an depressed European economy and auto market. The circumstance allows Ford to increase market share in the region. But what about profits?
Earlier this year, Ford issued initial guidance of a $2 billion loss in Europe in 2013. Since then, that number has been shrinking: in the first half of 2013, Ford lost just over $800 million ($462 million in Q1 and $348 in Q2) — less than what was otherwise expected by analysts and even the automaker itself. So, Ford is still losing money in Europe, but the losses are moving in the right direction.
This shouldn’t come as much of a surprise since the strategy Ford is using to turn around Europe is the same one that it used in turning around its North American operations. It worked well in the New World, and there’s little reason to believe the same won’t be true of Europe. So come next week, the financial performance of Ford Europe during the third quarter, and whether the automaker’s progress in the region is sustained or fleeting, will likely be one of the focal points of the conversation.
Stay tuned to Motrolix for coverage of Ford’s Q3 2013 earnings come October 24 (around 7:30 am EST), as well as for all other Ford news.