Ford of Europe Stephen Odell is seeing some light at the end of Europe's long tunnel.
While it’s far too early to predict that the struggling European car market is finally back in gear, there are growing signs that the worst is over, suggests Stephen Odell, the CEO of Ford European operations. With the maker now confident it will be back in the black by 2015, that’s encouraging Ford to prepare for the inevitable revival with a blitz of new products.
Ford had previously announced plans to roll out 15 all-new or completely redesigned models during a five-year period starting in mid-2012. But over a dinner prior to the start of the Frankfurt Motor Show, Odell says Ford has upped that to 25 new products during the same timeframe.
“We are at the bottom,” the executive says. And while he cautions, “There are no major signs of uptick,” he insists, “it does feel like we’re running along the bottom.”
Ordinarily, that might not seem like a very positive assessment, but consider that European sales have been tumbling by at least 500,000 annually in recent years, the numbers from the first part of 2013 dipping to two-decade lows. That forced Ford to take a number of critical steps, including the planned closure of its big assembly plant in Genk, Belgium and two smaller facilities in the U.K.
Ford's new Mondeo Vignale makes its Frankfurt debut.
By the time those and other cost-cutting steps are completed by the end of 2014, notes Odell, Ford will have reduced its European capacity by 18% and after the inevitable, initial costs associated with those closures it ultimately expects annual savings of as much as $500 million.
(For the latest introductions and headlines from the 2013 Frankfurt Motor Show, Click Here.)
Ford isn’t the only maker taking drastic steps on a continent where plant closings are almost unheard of. Struggling PSA Peugeot Citroen, Fiat and General Motors’ Opel are also reducing capacity, a step industry analysts have long seen as critical in a region that had too much production capacity even when sales were running at record levels earlier in the decade.
“You just can’t run with that much excess capacity” under even ideal conditions, says Odell.
(Battery-cars dominate as European makers charge into Frankfurt. Click Here for the full story.)
Ford took even more drastic steps in North America during a recession that saw sales fall by almost 40% at their worst. Now, if anything, it can’t keep up with booming sales growth during the automotive recovery. But the good news is that its margins have nudged into double-digit territory. The challenge will be to do something similar in Europe once the recovery finally does appear.
The good news, explains Odell, is that Ford of Europe’s market share has jumped for five straight months and retail demand – excluding commercial, government and rental fleets, has risen for seven consecutive months.
Ford still has plenty of challenges ahead of it. Earlier this year, Odell declared that he expected to be delivering a profit again by 2015. But the first quarter then saw Ford’s European operations plunge $462 million into the red compared to the $2.4 billion in profits delivered in North America.
This time, Odell is, if anything, even more confident that all the cuts, along with the new products on tap, “will lead us to profitability by 2015. In the full year,” he stresses, “we will be profitable.”
(Former Ford luxury brand Jaguar rolls out its first-ever crossover. Click Here for a closer look at the C-X17 Concept.)
Compared to some key rivals like Volkswagen AG, Ford has taken a moderately low-key presence at the Frankfurt show. But it did roll out a concept version of what will soon turn into the next-generation S-Max people-mover. And it showed off the new Vignale, a high-line version of its midsize Mondeo sedan and wagon line.
After selling off its Jaguar, Land Rover, Aston Martin and Volvo brands, Ford no longer has a direct presence in the European luxury market – at least until it may eventually try to bring Lincoln across the Atlantic. The Vignale brand-within-a-brand is designed to address that problem by offering unique, upscale design cues and a new level of customer service that will include the availability of a personal concierge.
Taking on more established luxury brands with mainstream Ford could be the riskiest bet the Detroit-based maker is taking in Europe right now. It is clearly confident that the traditional mid-market products it is planning to roll out will find plenty of customers as the European economy begins its eventual recovery.