Ford’s 2014 Fiesta sells well in Europe. Photo Credit: Ford Motor Company.
“I can’t say that I see major signs of an uptick, but it does feel like it’s running at the bottom,” said Stephen Odell, Ford of Europe CEO, according to Automotive News.
You know it has been a rough time period when a quote like that is exciting news for most Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) investors. That’s the situation in Europe, and finally investors can see the light at the end of the tunnel. Let’s take a closer look at the dismal situation that that the auto market in Europe is in, and see what moves Ford Motor Company (NYSE:F) has made that will give it an edge to profit sooner than competitors.
Black hole for profits
Ford predicts 13.5 million vehicle sales in the 19 countries of western Europe, which is an improvement over last year but a long way from its peak of 18 million units sold in 2007 – a number Europe may never reach again. Ford Motor Company (NYSE:F) recently narrowed its loss expectations from $2 billion to $1.8 billion this year, but has only lost $810 million through the first six months; leaving a chance that it could beat estimates for the full year.
That $1.8 billion is purely bottom line, lost profit; it’s a substantial number when you consider that Ford Motor Company (NYSE:F) reported a net income of $5.6 billion last year. Now you can understand why investors cheer to see the bottom of vehicle sales in Europe, and look forward to simply breaking even! Recently Odell told reporters that Ford expects to post a full-year profit in 2015. That may seem like a difficult goal to accomplish, but Ford has a few tricks up its sleeve.
When it comes to Ford Motor Company (NYSE:F)’s production capacity in Europe, less is more. Less capacity means more profitability, for now. Odell also said that Ford Motor Company (NYSE:F)’s move to take out 18% of European capacity should leave it well-positioned, according to Automotive News. The less is more theme doesn’t hold true for Ford’s next trick, upping the amount of models it’s introducing into the region to boost sales and market share. Ford will be adding at least 25 new Ford models into Europe over the next five years, up from the 15 models previously announced. All that’s great news for long-term investors, but for the short-term-thinking Wall Street it’s all about “What have you done for me lately?”