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Ford Motor Company (F)’s Latest Turnaround Takes Hold in Europe

Ford’s new B-Max – a Fiesta-sized mini-minivan – has rapidly become a best-seller in Europe. High gas prices have made small kid-haulers like the B-Max popular with Europe’s young families. Photo credit: Ford Motor Co.

Are things finally looking up for Ford Motor Company (NYSE:F) in Europe?

Ford Motor Company (NYSE:F) lost $810 million in Europe in the first half of 2013, and is almost certainly set to lose at least that much in the second half of the year.

But even as overall auto sales in Europe remain mired in their worst slump in decades, something interesting is happening at Ford Motor Company (NYSE:F): The Blue Oval’s sales in Europe are up.

The market was down, but Ford’s sales were up

Ford Motor Company (NYSE:F) said on Tuesday that sales in the 19 countries it counts as “Europe” were up 2.3% in August. That may not sound like much, but analysts estimate that industrywide sales in Europe were down over 5% last month (official figures won’t be released until later in September).

That means that Ford Motor Company (NYSE:F) gained market share in Europe last month – it’s up to 7.5% from 7% a year ago. Ford also pointed out in a statement that its retail market share in the five biggest Western European markets (the U.K., Germany, France, Italy, and Spain) was up for the seventh month in a row.

This all comes despite the fact that new-vehicle sales in Europe are hovering near lows not seen in 20 years, as deep recessions in countries like Spain and Italy have gradually led to slowdowns in places like Germany that depend on exports to other European markets.

How is Ford gaining ground in such tough conditions? And will the conditions get even tougher?

Ford’s turnaround plan for Europe looks awfully familiar

Last fall, Ford CEO Alan Mulally and his team announced a comprehensive turnaround plan for Ford Europe, which was on its way to losing over $1.7 billion in 2012. I said at the time that that plan looked familiar – it’s essentially the same “One Ford” strategy that put Ford on the path to big profits here in North America.

The gist of that approach is pretty simple: a single global line of vehicles produced to a premium standard, with just enough factories to meet demand. Top-notch vehicles – in any market segment – can command premium prices, which boosts profits. At the same time, busy factories are the most profitable kind – and having just enough keeps fixed costs low, which makes the company less vulnerable in a downturn.

That has worked wonders for Ford here in North America, where it has the happy problem of trying to keep up with demand for its hot products. Meanwhile, in Europe, Ford had too many factories and a so-so product lineup.

Enter Ford’s turnaround plan: The company has already closed two factories in the U.K. and is set to close a big facility in Belgium next year. Meanwhile, Ford has already introduced several new or refreshed products in Europe – and is drawing on its now-global lineup to add more.

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