Things are looking up foroverseas.
A weak link as the automaker emerged from the depths in North America following 2009’s economic crisis, the financial picture and midterm outlook is improving in Europe, andis beginning to expand its vision in the key markets of the Asia-Pacific, executives say.
The automaker today reported third-quarter earnings up 19% to $2.6 billion overall, with North American operations still accounting for the vast majority of the total.
But in Europe, where Ford has been flagging along with the rest of the industry, executives now see the company on a faster pace to break even, and they are stepping up a new-product assault to take advantage of what they say is a slowly improving economic and market picture.
“We think the market has turned a corner,” Chief Financial Officer Bob Shanks says of Europe in a conference call with analysts and reporters to discuss the latest financial results. “It seems to us (the market has) stabilized and we’re seeing signs we should start to see very modest growth.”
The automaker projects industry sales of 13.6 million new vehicles this year in Europe, down from 14.0 million in 2012, with its share to hold steady at about 7.9%.
To take advantage of the expected uptick over the next couple of years, Ford is boosting its product plan, now targeting a rollout of 25 new models in Europe within a 5-year span that began in September 2012. Previously, the automaker had just 15 new models in the pipeline.
“Everything is looking positive for growing the business,” Shanks says of the European market, adding Ford now thinks it might post a small profit there in 2015, rather than simply break even. “We’re starting to see transaction prices tick up a bit, we’re holding the line on incentives…and our plant closures are going well.”
The automaker already has taken down a factory in the U.K. and will shutter its Genk, Belgium, operation at the end of next year. No other closings are planned, but Shanks says management continues to monitor the market and he vows to keep capacity matched with demand.
“If we think we need to address excess capacity, we’ll do that…in any part of world,” he says, noting that in Europe the industry overall has too many underutilized plants. “But we’re comfortable with what we’ve done in Europe and what we’ve announced.”
Ford Europe lost $228 million in the quarter, but that marked a $240 million improvement from year-ago, and Shanks says the automaker is sticking with its previously announced target of a 6%-8% profit margin longer term. Ford posted a 10% margin in North America, and Shanks says over time it wants all its automotive operations to average about 8%.
The company also is stepping up its play in the Asia-Pacific region, where it is in the process of nearly doubling its production capacity to 2.9 million vehicles from 1.5 million in 2011. Ford is targeting global new-vehicle wholesales at 8 million by 2015, up from about 6 million today, so the region is expected to play a big part in that growth.
“Clearly that has to be driven by products,” Mark Fields, chief operating officer, says. “Our product pipeline is very full. And we’re in the process of adding capacity. We’re extremely excited. We have to have the physicals in place, but we’re working on it.”
Unsurprisingly, China is leading the charge for Ford in the region, Shanks says, with wholesale deliveries up 51% and revenues increasing. “But we have a lot of work to do in the rest of the region. The strategy is to grow aggressively with an expanding product portfolio.”
Ford says Asia-Pacific vehicle sales swelled to 947,000 units in the first nine months, up from 725,000 year-ago, while its operating margin bloomed to 3.6% from a loss of 1.6% over the same period.