Ford Sees Strong Gains In Europe

DEARBORN (WWJ) - A significant jump in first-half sales has Ford optimistic that its European turnaround is getting into gear.

"We are very, very pleased on where we are on the European transformation plan," said Steven Odell, president Ford of Europe, Middle East and Africa.

Ford's European sales rose 6.6 percent in the first half of the year, slightly outperforming the industry average. However, Odell says the company is selling a much richer mix of products, and selling with fewer discounts.

"The three core elements, which I've always said were equally important in measure--of products, brand and cost--are all delivering at, or in some cases, better than we thought it would do."

Odell, meeting with reporters at Ford World Headquarters, says Ford remains on track to post a profit in Europe next year. We'll learn more about the company's European progress, when it releases its second quarter profit report on July 24th.

Costs have been cut, as Ford has already closed two plants, and is planning to close a third this year, saving the company $400 million, which Odell says will be used to support the recovery in Europe.

It's a recovery that's more pronounced in Northern Europe, particularly in Germany and the UK, but is starting to see some improvement in the harder hit southern European countries, where unemployment can top 20 percent.

"We're seeing Spain and Italy already starting to ramp up."

But, says Odell, the high jobless rate remains a drag on the European recovery.

"The issues still inhibiting a faster European recovery are unemployment."

Russia is also an area of concern, with June car sales in that country falling 17 percent in June, the worst showing in four years. That followed a 12 percent decline in May.

"Russia, our industry outlook is that it's below everybody's expectations," said Odell.

Analysts say a weakening of the Ruble has been hurting the Russian auto market. Odell sees the long term outlook in Russia as bright. But the weaker short term market has forced Ford to cut between 700 and 800 jobs at their joint venture in St. Petersburg.

The increased demand in Europe has been fueled by a stronger demand for higher end trims of Ford products. Odell says the more loaded "Titanium" trims have been doing well. Ford is also preparing to launch a near-luxury "Vignale" trim of some of its European operations.

Those are aimed at people who are ready to move up to a more premium vehicle, but aren't ready to spend what's necessary to buy a Mercedes, Audi or BMW. Odell says there are no plans to bring the Lincoln brand to Europe.

Ford will see the competitive landscape shifting as GM phases out its Chevrolet brand in Europe, to concentrate on Opel.

"One less competitor is helpful, but it's not significant, I don't think, for Ford," said Odell.

Chevrolet, Odell says, has a different perception in Europe than it does in the United States.

"It was very much a value brand, and tended to be priced below where we are."

The European turnaround remains fragile, says Odell, and Ford will be ready to adapt if the market changes.

"You know there's another economic shock out there somewhere," he said. "Clearly, Europe has not recover as fast as other parts of the world."

Ford continues to monitor political upheavals that could impact the European market. Odell says the fact that the situation in the Ukraine has not worsened has added some stability. Protests in Israel, as well as fighting in Syrian and Iraq are always causes for concern, but have not caused worry among consumers.

"Middle-East, Israel, Syria have been volatile for a long period of time. Even though it's volatile, we don't see it as a step-up in concern."

Ford is preparing to bring a number of new products to Europe. Odell sees the new Edge as being very popular. He told reporters that he's not sure how many Mustang's Ford will have to sell in Europe. But, it won't be enough to meet demand.

"Mustang is and has never been about selling 'x number of Mustangs," said Odell. "We know we can sell them. It's how we can use it to polish the brand."