One year on from Jac Nasser’s appointment as chief executive of Ford, poor European sales continue to dog the company.
So far strong American sales have bought the company out of trouble elsewhere in the world.
It has revamped its Latin American operations and now speculation is rife that it is Europe’s turn.
“We are seeking tough cost reductions across Europe,” Nick Scheele, chairman of Ford Europe, said in a Financial Times interview.
Since the 51-year old Jac Nasser became chief executive, he has shaken up Ford’s corporate culture.
He has bought Volvo for $6.45bn, tried to overhaul the way they design their cars and launched plans to increase their luxury-car sales.
Ford has done well in North America by discontinuing slow-selling, unprofitable car models and replacing them with more lucrative models.
“The North American earnings are going to keep getting better and the rest are going to be nonfactors for Ford for a while,” one analyst said.
These “non-factors” include Latin America.
In Latin America, the collapse of the Brazilian economy hurt sales as did its failure to invest in new models and factories.
This prompted Ford to engage in a $2bn restructuring of its Brazilian unit.
Changes in Europe
With car prices under pressure, Ford is struggling to make money in Europe.
In the third quarter of last year, Ford earned $1.11bn, 11% more than in the third quarter of 1998.
By contrast, Ford’s European operations lost $171m.
Ford sales have been hit by the fact that rival car makers, such as Volkswagen, have introduced more exciting car designs.
In part, Ford sales in Europe have been hit by the strength of sterling.
It still has 28% of its European cost base in the UK, one of its strongest European markets.
But many analysts think that Ford’s most vulnerable factory is in Genk, Belgium. If it were closed down, manufacture of the Mondeo would be switched to its Cologne factory.
This would also boost its presence in Germany.
Success in Germany is seen as crucial for success in Europe.
Ford has already moved its European headquarters from Britain to Germany, a move intended to increase its competitiveness in the continent’s biggest single market.
The thinking behind the move was that if the company was to move up the European league, it had to relocate to Germany.
Ford’s market share in Britain is still a comfortable 18%, while in Germany, its market share has slipped below 9%.
Germany is almost twice the size of the next-largest European markets, which are Italy, Britain and France, and accounts for about a quarter of total west European car sales.
General Motors has fared better than Ford in that market, partly because its Opel brand is seen as a German marque.
By contrast, Ford has continued to be seen as a foreign brand.