Disappointing Q2 Result Could Spur Ford to Cut Cars in Europe
Though Brexit played a significant role in Ford of Europe’s second-quarter woes, the wider consumer shift to crossovers was a major contributor to a result that had CEO Jim Hackett “extremely dissatisfied.” Coupled with comments from CFO Bob Shanks, it seems likely that Ford could respond with a major lineup shakeup not unlike what was announced for the United States earlier this year.
“The low-performing part of our portfolio represents a majority of our volume, revenue, and capital deployed in the region,” Shanks told Automotive News, specifying “cars and multi-activity vehicles such as C-MAX.”
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On the flipside, the most profitable aspects of Ford’s European operations are the Transit, Kuga, Ranger, and “selected imports” likely including the Edge and Mustang. Shanks said that these vehicles represented more than 200 percent of Ford of Europe’s profits though they cumulatively account for less than half of volume and revenue.
Ford Motor Company President of Global Markets Jim Farley told Automotive News that the automaker needs “to redesign Europe” in order to hit its projected profit margin of 6 percent. This would involve focusing more on light commercial vehicle sales — commercial vans are currently pulling in 13 percent profit margins in Europe. On the other hand, higher trim levels of popular new products like the Focus and Fiesta are proving only marginally profitable.
Ford said in its Q2 results call that it expects to take a full-year loss in Europe in 2018. In 2017, the automaker finished the year with $234 million in profit.
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News Source: Automotive News (subscription required)