Ford and General Motors both predict a return to profit in Europe this year after weaker than expected results in 2003, officials with the US carmakers told Reuters on Tuesday.
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“Profitability in Europe, I think, will be a marginal profit over the next year,” David Thursfield, Ford’s president of international operations and chairman of Ford Europe, told Reuters at the Detroit auto show.
The report said both Ford and GM expect to start feeling the benefits in Europe of past restructurings and a number of new vehicles planned for launch in 2004.
GM’s German Opel arm is due soon to roll out an all-version of its volume-selling Astra line, also badged as Chevrolet, Holden and Vauxhall and sold around the world, while Ford is scheduled to launch a completely redesigned Focus range and has already put the C-Max minivan derivative on sale across Europe.
Reuters noted that Ford of Europe struggled in 2003 with surprise losses after what had been billed as a successful turnaround. After losing slightly less than $US1.2 billion through the first three quarters of 2003 excluding charges, Ford has said the unit would break even in the fourth quarter, but that it would take restructuring charges of $550 million to $600 million, mostly for cutting 6,700 jobs, the report added.
Meanwhile, Reuters said, GM expects to rebound with a profit in Europe this year after losing $220 million in the first nine months of 2003, exceeding its previous forecast of a loss of up to $200 million for the entire year.
“We’re clearly focused on being profitable in ’04,” Mike Burns, the head of GM’s European automotive operations, told Reuters in an interview.
Burns reportedly said he expects the Saab premium car unit to cut its losses further after another unprofitable year in 2003. Under Swedish accounting guidelines, Saab lost 1.5 billion Swedish crowns ($210 million) through the first six months of 2003, Reuters said.
Both GM and Ford reportedly said swings in international currencies had a big impact on earnings and the competitive landscape in Europe last year.
Saab manufactures most of its cars in Sweden, and the stronger Swedish crown, particularly in the second half of last year, hurt its earnings by about $150 million, Peter Augustsson, the head of Saab, told Reuters.
Augustsson reportedly said Saab expects its vehicle sales to hit a record for the Swedish brand this year, rising to more than 140,000 from about 131,500 in 2003. Sales next year will be boosted by the new 9-2X car [a lightly restyled and rebadged Subaru Impreza], and a full year of the new 9-3 convertible.
Ford’s Thursfield told Reuters the European market had become more competitive as the US dollar sank to record lows against the euro, and European consumers shifted from mass-market brands to premium ones.
“The profitability and the margins on products coming into the US (from Europe) has disappeared,” Thursfield reportedly said, adding: “So the battleground has come back into Europe, where the big global manufacturers that are strong in Europe have got to look to Europe for improvements.”
Had the European market not shifted so quickly, Ford of Europe would be posting “significant” profits, Thursfield said, according to Reuters. He reportedly added that Ford was also putting more resources into its European luxury brands, especially Volvo and Jaguar, to keep pace with the market.
Volvo is launching a fully redesigned S40 (saloon) and V50 (wagon) line worldwide this year while Jaguar is introducing a wagon version of its compact X-type saloon. 2004 is the first full sales year for its redesigned XJ luxury saloon line while a redesigned XK luxury sports car line is also expected soon.
