Ford Remains Confident in Russian Market as Profits Plunge

Ford continues to lose money in Europe, posting a $185 million loss in the region in the first quarter largely because of the continuing drag of the Russian market.

Russian sales last year fell 10.5% to 2.6 million, and last month plunged 43%. But Ford remains committed to the market while other automakers such as General Motors have largely withdrawn.

Ford CEO Mark Fields says Russia remains an important market for the automaker, which operates a joint venture with Sollers in the country.

“What we see in Russia is a big and important market,” he says in a conference call with reporters and analysts to discuss Q1 results. “Even at a reduced rate, it’s still going to be one of the bigger markets in Europe.”

In 2013 Russia sold 2,911,857 vehicles, trailing only Germany in Europe with 3,257,718 deliveries, according to WardsAuto data. Sales in Russia dropped to 2,606,824 in 2014, further distancing itself from Germany (3,356,718) and falling behind the U.K. (2,844,602).

Through Q1, Russia vehicle deliveries were just 397,821, putting it fifth behind Germany (832,467), the U.K. (844,524), France (579,800) and Italy (462,951).

Fields says once Russia stabilizes and begins to grow again, it likely will be the largest European market. Ford continues to invest in the country and it recently acquired preferred shares of Sollers, making it the controlling partner. The JV’s financial results now are fully integrated with Ford’s global operations.

“We’re making progress on our presence in (Russia),” Fields says. “It’s difficult now, but we think we’ve done a good job in localizing products. If you look at the market and what we’ve done with our portfolio and localization and relationship with Sollers, we’re dedicated to succeed.”

Despite the drag from Russia and its European operations as a whole, Ford posted a $924 million profit in Q1, down $65 million from year-ago. Vehicle wholesales in the quarter totaled 1,568,000, while revenue reached $33.9 billion.

The North America, Middle East and Africa and Asia-Pacific operations were profitable in the quarter, although growth in China, the world’s largest automotive market, is slowing.

“We’re seeing signs of slower growth (in China),” Fields says. “We’re seeing it in the B- and C-car segments as they get more competitive and customers look at small CUVs.”

Ford remains in good position in China, he says, noting the automaker continues to invest to increase its portfolio in the region and launch the Lincoln luxury brand.

“Regardless of the industry situation, we think we’re well positioned with whatever the market throws at us,” Fields says. “Even in the C-segment, which is getting more competitive, the best elixir is having new products. So overall it is slowing, but we have a lot of confidence in our future there.”

In the Asia-Pacific region overall, Ford expects this year to be strong, with results improving substantially in the second half due to added capacity and several new product launches beginning midyear.

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