When we last heard about Ford and its troubles in Europe, the carmaker insisted that it had things under control. It planned to use the same tactics that led to its stunning North American turnaround to fix its operations across the Atlantic. And while there was no guarantee that broader European markets would cooperate, Ford seemed confident that its plan would take root.
Instead, Ford dumped an unhappy surprise on investors Tuesday. It expects to lose $2 billion on its European operations in 2013, on top of a $1.75 billion loss for 2012. That means Ford will lose close to $4 billion in Europe in two years’ time, something that no one could have expected as recently as last spring. Ford shares dropped 4.6 percent to $13.14 Tuesday. At one point, shares dipped to $12.89.“Since providing guidance in October, Ford’s outlook for industry volume has deteriorated.
Ford now expects industry volume to be in the lower end of the range of 13 million to 14 million units. In addition, Ford is being adversely impacted by higher pension costs due to lower discount rates, and a stronger euro,” Ford said. “As a result, Ford now expects full year 2013 results for Ford Europe to be a loss of about $2 billion, compared to prior guidance of a loss about equal to 2012.” Ford’s decline in Europe has been breathtakingly swift, and deeper than the company originally thought. Last July, Ford raised eyebrows by disclosing it expected a $1 billion Euro loss.
The more the company realized its problems in Europe, the deeper the loss got. It revised its forecast to $1.5 billion and ended up even more in the red than that. It previously said it expected a European loss for 2013 along the lines of 2012. Of course, things have been awful for almost every European automaker. General Motors‘ Opel division, mired in losses for more than a year, has taken only baby steps toward getting things turned around. Fiat is in significant trouble, after a turnaround that made Sergio Marchionne an automotive household name. French automaker PSA, the parent of Peugeot and Citroen, and now a partner with GM, is facing its own crisis.But given that Ford now expects a $2 billion loss in Europe this year, it’s logical to ask whether the turnaround plan is going to be enough. Under it, Ford plans to reduce manufacturing capacity by 18 percent, and aim for a profit margin of six to eight percent, shy of North America’s 10 percent-plus, but respectable in such a hotly competitive market. Mulally also promises a “laser focus” on introducing new products, including 15 global vehicles set for the next few years.