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Ford Could Cull European Car Lineup Like It’s Doing In North America

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Despite returning to profitability in Europe in recent years, Ford Motor Company’s work in the region isn’t done; there are plenty of money-losing products on offer there, contributing to total losses of $73 million in the second quarter of 2018. Solidifying its ability to consistently earn a profit in Europe could involve Ford culling its lineup of low-margin products like cars and MPVs (multi-purpose vehicles, a.k.a. “minivans”) as the company is doing in North America, although it hasn’t officially said so outright.

Instead, the automaker said back in May that “big changes” were in store over the coming year in the Europe and South America markets, and this month indicated that it’s less than happy with the fiscal performance of products in certain categories – including small cars and MPVs.

Those “low-performing” products represent “a majority of our volume, revenue and capital deployed in the region,” Ford Chief Financial Officer Bob Shanks said, according to Automotive News. The Ford Transit commercial van, Kuga compact crossover, and Ranger midsize pickup, along with “selected imports” likely including the Edge crossover and Mustang pony car, account for more than 200 percent of Ford’s European profits, the CFO said. That’s despite accounting for less than half off its sales and revenue.

Ford’s President of Global Markets, Jim Farley, said that the automaker needs to “redesign Europe, centering the operations on our profitable [light-commercial vehicle] business,” he said, while also giving more focus to utility vehicles. Commercial vans earn a margin of about 13 percent for the automaker in Europe.

By contrast, small cars like the Ford Fiesta and Focus sell in large numbers, but end up costing the company money due to their low price points. Ford has tried combating that with higher-priced, feature-rich versions like the crossover-inspired Active models and premium Vignale models, but such products are “delivering incremental profit but lower than planned,” the automaker says.

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Aaron Brzozowski is a writer and motoring enthusiast from Detroit with an affinity for '80s German steel. He is not active on the Twitter these days, but you may send him a courier pigeon.

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Comments

  1. Andrew Christian

    For all the folks that feel “personally affected” buy this change, this is called the free market model. A vendor is reacting to their profits and adjusting their products to make a larger profit per vehicle. That’s capitalism for you.

    Although my personal opinion is that Ford isn’t producing compelling cars, the numbers don’t lie. You can emotionally ask someone to continue making things they are losing money on.

    Reply
    1. Andrew Christian

      Can’t*

      Reply
  2. Joseph

    The issue with the European Cars is not the sales volume but the profit level – so this is about greed not “free markets” – as Free Markets consider Volume, with producers normally accepting a lower margin per unit with this being made up by greater volume.

    However, as indicated in comments above Ford Cars are not exciting enough and may have a volume limitation.

    Second the cars not being exciting mean that they can’t
    justify higher prices and margins. However, the sales mix in Europe may not change anytime soon due to both the size of the continent and economic growth patterns

    Ford needs to reconsider its management team as this leaving or culling cars could leave Ford without a car product, and this could spell big trouble for Ford when SUV’s fall out of favor or don’t catch on in Europe or South America

    Reply

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