Big losses force European arm to shift focus to profitable models
Earlier this week, Ford announced its European arm had made a pre-tax loss of US$73 million ($98 million) during the first half of 2018, a massive change from the US$88 million ($118 million) profit the company booked in the second half of 2017.
Bob Shanks, Ford's chief financial officer, told Automotive News Europe and other outlets on an earnings call the "low-performing part of our portfolio represents a majority of our volume, revenue and capital deployed in the region", referring to the Ford of Europe's offering of "cars and multi-activity vehicles".
One model singled out as an under-performer is the C-Max people mover. Other vehicles thought to be under pressure include the Mondeo, S-Max and Galaxy.
The company is busy rolling out new generations of the Fiesta and Focus. Ford has tried to bolster earnings from these models through the high-end Vignale trim line and the quasi-off-roader Active models. Despite that, the new Fiesta and Focus are "delivering incremental profit but [at] lower than planned [levels]".
Jim Farley, Ford’s head of global markets, did admit the "majority of our deterioration” at the European arm came due to the uncertainty around Britain's exit from the European Union, and resultant the weakness of the pound sterling.
Farley also notes Ford of Europe is "behind on the shift to utilities and ... our portfolio under-indexes on this highly profitable and growing segment". He indicated new crossovers and SUVs will be launched by 2020 to improve the company's product mix.
In addition to growing its SUV portfolio, Ford will also concentrate on the light commercial vehicle segment. Farley said its various van models enjoy robust 13 per cent profit margins at the moment.
Ford will also seek to cut costs at its European operations, with its Blanquefort transmission plant set for closure or sale.
Shanks also highlighted partnerships are "part of our fitness toolkit", and these are expected to "play an even greater role" in the company's future.
Volkswagen and Ford signed an agreement this June to investigate a "strategic alliance" thought to be centred around commercial vehicles. Ford also has a long-standing engine partnership with the PSA Group, which runs the Peugeot, Citroen, DS, Opel and Vauxhall brands.