Ford Has Applied Crisis Restructuring to Europe With Success

Ford EcoSport
Automobile sales in Europe have been dismal, cutting into quarterly profits, forcing plant closures, and prompting layoffs. But Ford (NYSE:F) learned something during the financial crisis, and that knowledge may be helping the automaker outmaneuver the poor sales conditions in Europe.

In Europe, another quarter of shrinking gross domestic product, painfully high unemployment, and plunging consumer confidence — the evidence of the region’s sovereign debt crisis — has not created an atmosphere favorable to new car purchases. As a result, vehicle sales industry-wide are at a 20-year low, and, through April, when sales rebounded slightly, European auto sales were on an 18-month decline. When sales are reported for May on Tuesday, experts believe the figures will show yet another decline. No automaker knows for sure when the slump will end.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

But, paradoxically, Ford’s share of the 19 traditional European grew ever so slightly in May. Recent introductions of B-Max subcompact wagon, Kuga compact SUV and Ranger small pickup, helped the Dearborn, Michigan-based automaker increase its market share 0.3 percent to 8.3 percent, the second consecutive month of gains and the highest May share since 2009, according to Ford’s figures. The company applied lessons it learned during the financial crisis to Europe, and from recent data, it seems that the strategy has paid off.

Roelant de Waard, vice president of marketing, sales, and service for Ford of Europe, told The Detroit Press that the company is following the same restructuring template on the continent that worked in the United States during the economic crisis four years ago. “It’s fair to say there are a lot of parallels. I think the analogies are remarkable,” he said in a telephone interview. “The retail share, which is what we also focused on in the U.S. with all the new products, we’re following that trend in Europe.” De Waard noted that the introduction of a several new vehicles have helped the company grab more market share that its rivals.

Ford’s restructuring plan in Europe is very similar to the one executed in the United States: eliminate thousands of jobs, decrease vehicle production, and refresh vehicle lineups.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

According to de Waard, the last month European auto sales were “somewhat strong” was last May. This May, Ford sold approximately 100,000 vehicles in the 19 European markets, a 2.2 percent decline from the year-ago period. While this drop indicates that the automaker’s troubles in Europe are not quite over, that figure was significantly less than the projected industry decline of 6.2 percent. Again, new vehicles are expected to be Ford’s savoir in coming months as well. De Waard told the Press that new product offerings set for launch later in 2013 should help sales reverse their 18-month downward spiral.

Still, Chief Executive Officer Sergio Marchionne of Fiat, the parent company of Chrysler, warned last week that the “the market still has not hit bottom.” Yet Ford has said that sales in five countries — Ireland, Italy, Portugal, Greece, and Spain — seem to have hit rock bottom, and those are the countries that were responsible for the “lion’s share of the industry decline.” Comparatively, other markets are just beginning to experience sales slumps, including Germany, where sales fell 8.5 percent in April, following two consecutive record-setting years.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

To combat the tough business conditions, automakers have attempted to implement job and production cuts in Europe, although those efforts were partly stymied by Europe’s strong labor unions.

Ford has estimated it will lose $2 billion in Europe this year, and the company has plans to shut three plants in the region by 2014, a move that will cut its continental production capacity by 20 percent. General Motors (NYSE:GM), which is on pace to lose $1 billion in Europe this year, closed its Opel plant in Belgium in 2010 and may close another plant in Germany in 2014.

Here’s how Ford and GM shares finished trading on Monday:

Screen Shot 2013-06-17 at 9.44.39 PM

Follow Meghan on Twitter @MFoley_WSCS

Don’t Miss: Will GM’s New Recall Affect Consumer Views?