Ford Europe Regains Profit
Ford Motor Co. has clawed its way back to profitability in Europe even as it predicts the regional market will shrink for the second consecutive year, company executives said Tuesday at Europe’s premiere auto show.
General Motors Corp., meanwhile, acknowledged that it lags in turning around its money-losing European business, but said it expects fresh models from its Opel and Saab brands will boost its share of the market and help it break even in Europe in 2003.
Both auto makers portrayed Europe’s fragmented market as one of the toughest, especially during the current downturn when motorists are thinking twice before buying. Ford sees its improving performance in Europe as a harbinger for its U.S. business, whereas GM--satisfied that its North American business has regained lost momentum--is hoping this thrust will carry over into its European operations.
“Ford of Europe is absolutely a bright spot for our company in a difficult period. It’s blazing a trail that the rest of the company is trying to follow,” Ford Chairman William Clay Ford said at the media preview of the 72nd International Motor Show in Geneva.
After losing about $1.2 billion in Europe in 2000, Ford began slashing its production capacity to cut costs. It also set about rejuvenating its product line. The average age of Ford’s European models now is 2.9 years, almost half what it was a few years ago.
The company began regaining some of its lost market share, and last year it broke even.
“Ford of Europe is profitable again. It’s been awhile since we could say that,” said the European unit’s president, David Thursfield.
Ford’s newest model is the Fusion, introduced in Geneva as an “urban activity vehicle” targeted at young families. With a design Ford said was inspired in part by modern athletic shoes, the Fusion is a taller, chunkier version of the Fiesta passenger car.
The Fusion should make a “significant” contribution to Ford’s profit in Europe, Thursfield said.
Ford expects total European vehicle sales to slip this year to 16.9 million from 17.3 million in 2001. Last year’s sales were down from 17.8 million in 2000.
GM sees an even more dramatic decline in regional sales this year of as many as 1 million vehicles.
Analysts note that GM, which has done better than expected in its U.S. business, has been slower than Ford to make necessary adjustments in its European operations. However, GM now is in the midst of a plan called Project Olympia aimed at cutting costs and boosting profit in Europe.
GM Europe President Mike Burns dismissed negative comparisons with Ford.
“When Ford was losing money, GM was making money. We’re just at a different point in the [business] cycle,” he said. “When these things go bad, they take a long time to fix.”
