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jpd80

Ford resigned to underwhelming profit even after Europe cuts

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Ford resigned to underwhelming profit even after Europe cuts

KEITH NAUGHTON

 

For all the cuts Ford Motor Co. is poised to make in Europe, it’s resigned to the region staying a drag on profitability for the foreseeable future.

Ford on Thursday put a giant German van plant on the chopping block, started a strategic review of its Russia joint venture and vowed to consolidate operations in the U.K., adding to plans for a French transmission factory to cease production this spring.

Even with the cutbacks, Ford is targeting just a 6 percent profit margin in Europe for the long term.

That’s short of its 8 percent goal on a global basis. The company also stopped short of definitively saying it will close any plants and didn’t give any details about how many jobs it plans to eliminate.

The announcement left the market wanting more. Ford’s shares, which plunged almost 40 percent last year to levels last seen in 2009, traded slightly lower to $8.67 on an otherwise upbeat day on Wall Street Thursday. CEO Jim Hackett, who’s caught flack for coming up short on earnings targets and canceling an investor day last fall, will face pressure to be more open and act quickly to turn around a company facing risk to its dividend and credit ratings.

“Investor criticism for Ford over the past year has focused on a lack of details on the fitness plan,” Colin Langan, an analyst at UBS AG, wrote in a report to clients. “This release still lacks some specifics.”

Ford has stuck around despite Europe rarely generating positive returns for years. The same could be said for General Motors before CEO Mary Barra decided to abandon business there in 2017 by selling Opel and Vauxhall to France’s PSA Group.

 

Hackett, 63, and Barra, 57, will have more to share with investors soon. GM hosts an investor event Friday. Ford may announce a broader alliance with Volkswagen AG during next week’s Detroit auto show, according to people familiar with the matter, and Hackett and other senior executives will speak at several conferences coinciding with the event in Detroit.

 

Your move Mr. Hackett.........

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If that's really the case, if 6% is the highest they can get than they really just need to cut the cord and get out of Europe...

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Curious--6% unacceptable? 8% acceptable?  If the projections on the 6% are valid why would you not hang on?  It is a cyclical business for sure.  Easiest thing in the world is to consolidate all the way back to Dearborn!

Like to hear the reasons why 6% is the "go-no go" benchmark.

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3 hours ago, fuzzymoomoo said:

If that's really the case, if 6% is the highest they can get than they really just need to cut the cord and get out of Europe...

If you kill Europe, all the shit unzipps very quickly from there and you kill ROW and all your RHD markets, Ford becomes North America only.

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I see that "giant German van plant" becoming part of the Ford/VW alliance....

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The current issue IS chasing profit at the expense of all else and it really shows lately. Maybe stop worrying about shareholders and return to building great cars?  

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14 minutes ago, YT90SC said:

The current issue IS chasing profit at the expense of all else and it really shows lately. Maybe stop worrying about shareholders and return to building great cars?  

"Enhancing investor value" has always been the mantra of Wall Street....they don't give a shit about the companies as long as their investors make $$$.

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Let’s be real. Where does the investment to build great cars come from in large part?

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If you can't sell cars/parts/service, you can't make money. IF you cost cut your cars and gut service after the sale, no one will buy your product no matter how many investors threw money at you. No one apparently remembers what Jac Nasser's stint did to the company. 

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The problem with exiting Europe is that it costs a tremendous amount of money to do so, but Ford has been fairly quickly de-coupling from Europe so that operation can be spun off eventually.   Ideally Ford could partner with VW to take over most of their European operation which is something I've LONG advocated for.  I don't think we are close to that, but it's a possibility.  Ford wants to get out of the unprofitable volume segments which dominate their European business (Focus/Fiesta) and focus on utilities and vans.  I think they might be able to do that with VW's help since I know they are also struggling to run Europe with healthy margins despite enormous volume. 

It's going to be a fascinating thing to watch.  Ford has SOO many fires to put out it's mind-boggling.  

Edited by Assimilator

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1 hour ago, YT90SC said:

If you can't sell cars/parts/service, you can't make money. IF you cost cut your cars and gut service after the sale, no one will buy your product no matter how many investors threw money at you. No one apparently remembers what Jac Nasser's stint did to the company. 

I do...he also cut back on cars in favor of pickups and utilities...

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3 hours ago, Assimilator said:

The problem with exiting Europe is that it costs a tremendous amount of money to do so, but Ford has been fairly quickly de-coupling from Europe so that operation can be spun off eventually.   Ideally Ford could partner with VW to take over most of their European operation which is something I've LONG advocated for.  I don't think we are close to that, but it's a possibility.  Ford wants to get out of the unprofitable volume segments which dominate their European business (Focus/Fiesta) and focus on utilities and vans.  I think they might be able to do that with VW's help since I know they are also struggling to run Europe with healthy margins despite enormous volume. 

It's going to be a fascinating thing to watch.  Ford has SOO many fires to put out it's mind-boggling.  

 The fascinating part for me is that Ford and VW can help each other in Europe without any need of a high profile takeover, there's a great opportunity for both manufacturers to work together to either co-develop  or just supply each other vehicles that simplify manufacturing and lower costs. There are also bigger implications that stem from this for places like South America, Asia and possibly China......

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Unlike in the US (or even China), we don't have a clear product vision for Ford in Europe so we're left to speculate on what will happen there.  We know Ford has gone on record as saying that their only profitable vehicles are utilities and vans and they are loosing money on their volume products.  They've also acknowledged that Ford needs to transition from MPVs to SUVs.  It's quite possible Ford doesn't know what to do or they just can't get into yet.  Right now it sounds like the cooperation with VW is still fairly narrow in scope, focusing entirely on European truck production which won't save their car business but might help reinforce their core competencies. 

Ford has just fallen so fast and so hard on the global stage and it looks like they are just acknowledging it which is the most alarming part.  I know a huge part of that was Mark Fields which did a fairly good job prepping new technologies for North American but did nothing to their global business where he seem to take no interest.  I think part of that is just the culture he comes from,  Ford was run regionally, not centrally.  We might have moved back to the regional outlook briefly dismantled by OneFord.

Edited by Assimilator

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So if the market in Europe favors smaller cars, and smaller engines, why is it that the euro guys can make these cars and profit from them, but Ford can't?

 

 

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2 hours ago, Assimilator said:

Ford has just fallen so fast and so hard on the global stage and it looks like they are just acknowledging it which is the most alarming part.  I know a huge part of that was Mark Fields which did a fairly good job prepping new technologies for North American but did nothing to their global business where he seem to take no interest.  I think part of that is just the culture he comes from,  Ford was run regionally, not centrally.  We might have moved back to the regional outlook briefly dismantled by OneFord.

Even though it's a small market, Australia stands as an abject reason why Ford's global products fail so miserably, the local Ford division is so embarrassed by them that they just don't bother advertising. In star contrast to that, everything is about Ford Ranger ant it premium pricing, if Ford could replicate that kind of interest in other products, they wold be more than a now also ran bit player in our market. Whatever Ford Europe is doing with its outdated designs, it just needs to stop and so something, anything else.....

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I'm starting to get the feeling that Mually fixed the here and now issues that Ford had in 2006 or so, but left them with no plan what so ever for the future. There's really no reason why its take so long for a new Focus and Kuga/Escape to come out-they should have been out 12 months ago in NA and Europe. 

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1 hour ago, silvrsvt said:

I'm starting to get the feeling that Mually fixed the here and now issues that Ford had in 2006 or so, but left them with no plan what so ever for the future. There's really no reason why its take so long for a new Focus and Kuga/Escape to come out-they should have been out 12 months ago in NA and Europe. 

The one thing that Mulally never understood is that buyers have different preferences in different markets. 

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2 hours ago, silvrsvt said:

I'm starting to get the feeling that Mually fixed the here and now issues that Ford had in 2006 or so, but left them with no plan what so ever for the future. There's really no reason why its take so long for a new Focus and Kuga/Escape to come out-they should have been out 12 months ago in NA and Europe. 

I also believe what we're seeing is blowback from the Mulally era. 

 

Edited by The Handler

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Unnecessary duplication in one era becomes necessary diversity in another.

One Ford cannot move quickly enough to change with changing needs, it relies on everything being and staying the same.

Edited by jpd80

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I'm English and bleed Ford blue...........so they're continued struggle in Europe really saddens me.

From the mid-60's through to the mid 90's, Ford ruled the market. Cars like the Cortina and Sierra were the number one seller. Mid-sized saloons and (later) hatchbacks, ruled. The Cortina and Sierra were the company car user's 1st choice. My dad had a number of both and that's where my love of Ford began.

Then saloons started to fall out of favour for the more versatile MPV. Ford were slow on the uptake here (although the same goes for most European marque as it was the Japanese that ruled this sector to start with). Ford teamed up with VW (yes, way back in the late 90s/early 2000s) for the Galaxy/Sharan twins......and it took them far too long to filter the MPV down to the smaller models (S-Max/C-Max/B-Max). Then MPVs fell out of favour for SUVs. Once again, Ford was late to the party. Where's Ford's Explorer for Europe? No where. The Volvo XC90 and its ilk have proven the 7 seat SUV will sell like hot cake here and yet Ford STILL doesn't have anything to offer. We have the EcoSport (I can't recall the last time I saw one) and Kuga (we actually own one)........and that's it!

Ford seems to think the "Active" models will fill this niche, but I'm not so sure as they offer nothing over the standard model.

The other problem is image. Over here most people would rather buy an Audi/BMW/Mercedes. Ford realised their biggest selling trim was the Titanium (top trim) so they introduced Vignale. Even nicer trim and dealers had to invest in special areas of their showroom/service area for Vignale. Again, I can't recall the last time I saw ANYTHING on the road in this trim level

Ford of Britain has a proud history (heck, the Model T was built in Manchester!!!) but that's been eroded over the decades.

I don't know what the answer is for Ford, but I hope they work it out and don't bail on Europe. 

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Here's the thing. The Ford Family is too proud to leave Europe. They, and in particularly Bill Ford, are proud of their Irish history.

They will alter their plan accordingly, but will not leave. 

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On 1/12/2019 at 12:53 AM, jpd80 said:

If you kill Europe, all the shit unzipps very quickly from there and you kill ROW and all your RHD markets, Ford becomes North America only.

Absolutely, bail on Europe there goes the small/fwd car portfolio for ROW. GM bailed because of massive losses on PGA in Europe.

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30 minutes ago, Assimilator said:

slow to adapt to changing markets.

That's always been a big weakness for Ford.

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On 1/12/2019 at 11:27 PM, silvrsvt said:

I'm starting to get the feeling that Mually fixed the here and now issues that Ford had in 2006 or so, but left them with no plan what so ever for the future. There's really no reason why its take so long for a new Focus and Kuga/Escape to come out-they should have been out 12 months ago in NA and Europe. 

I always thought this was the plan - no matter who was in charge, Mulally, Fields, etc

Step 1) eliminate global and even regional duplication and pare down to the core "one Ford" vehicles and platforms.

Step 2) maintain that core lineup, while then simultaneously adding specialized regional vehicles based upon the one Ford platforms/architectures

 

This approach would eliminate the powertrain, electrical, HVAC, etc. duplication around the world that we saw, and have a core lineup (spreading costs out across the globe), all while also having more regional-appropriate vehicles where necessary - the Chinese Taurus or Chinese Territory, or Bronco, etc. are examples - using core platforms as the starting point, and building something for a region on that.

Mulally implemented Step 1, but from there it was ???

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