Ford Motor Company (F): Salvaging Europe

The constant headlines of doom and gloom regarding Europe’s dismal outlook have subsided some, but rest assured the region is still in turmoil. This is especially true in Europe’s automotive industry, where Ford Motor Company (NYSE:F) still expects to lose a whopping $2 billion this year. Crosstown rival General Motors Company (NYSE:GM) can’t escape the pain and is also expecting a significant loss. Europe has been the main reason that investors remain cautious to buy into automotive stocks, but many are overlooking how quickly conditions could change, as they did here in the U.S. Europe will be extremely important for Ford Motor Company (NYSE:F)’s earnings and share valuation over the next couple of years, so here’s what investors need to know.

Europe implosion
To say that Europe has been ugly for vehicle sales is an understatement. As my Foolish colleague John Rosevear pointed out, GM has lost $18 billion in Europe since 1999. That overall number might give a brief moment of relief at Ford Motor Company (NYSE:F) if it weren’t for the expectation that it will lose $2 billion this year alone.

While analysts debate whether or not we’ve seen the bottom in Europe’s declining market, Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) aren’t resorting to the same strategies that failed here in the U.S. during our financial crisis. Here in the U.S. Ford managed to lose $30 billion from 2006 to 2008 – a ridiculously large number.

That staggering loss happened because Ford wanted to keep its market share; to do so it was forced to dish out massive incentives – basically handing consumers a couple grand in cold hard cash as they drove off the lot. This time both Ford and General Motors Company (NYSE:GM) realize that’s not a winning solution and have opted to concede market share temporarily in favor of minimizing bottom-line losses.

On the other end of the equation, Ford Motor Company (NYSE:F) hopes that its new models designed for the most popular segments will keep its market share at respectable levels. There’s proof this is working in the latest registration numbers.

Passenger car registrations came in at 1,042,742 for May, which is a 5.9% decline versus last year. If you dig through the numbers, that’s the worst recorded May since 1993. The biggest takeaway for Ford is the change in its registrations and market share since its new models – B-MAX, Kuga (Escape), and Ranger – were recently launched. Through May, Ford Motor Company (NYSE:F) was one of the biggest losers in Europe with its registrations down 12.8%, but it was one of the biggest winners these last two months. In May, Ford’s registration numbers were only down 0.3% and its market share actually increased from 7.5% to 8%.