Ford Is Turning It Around in Europe


Sales of Ford's hot little Fiesta ST, introduced in Europe earlier this year, have blown past Ford's expectations. The Fiesta ST will be coming to the U.S. later this year. Photo credit: Ford Motor Co.

Here's some good news for automakers (among others): After months of declines, new-vehicle sales in Europe were up 4.3% in July.

Here's some even better news for Ford shareholders: The Blue Oval's sales in Europe were up 8.7% for the month.

Ford has been struggling in Europe for a while, but recently it has started to show some momentum. It's impressive to see that Ford more than doubled the overall market's gains, not least because it means that the Blue Oval is picking up market share in the world's third-largest auto marketplace.

It also means that the company's plan to turn around its European operation, which lost over $1.7 billion last year, is starting to work. And that could be great news for Ford stock.

The storm isn't over, but the worst may have passed
There's a sense at Ford that the worst has passed in Europe, but that doesn't mean that the storm is over. Ford's Europe sales chief Roelant de Waard said in a statement last Thursday that "it is too early to say a recovery is under way given the continuing economic uncertainty" in the region.

Still, after so many months of losses, with Europe's auto sales still not far from 20-year lows, any improvement is welcome. And it's especially welcome for Ford, which has already taken big strides toward implementing the turnaround plan it announced last fall.

That turnaround plan has several interconnected parts; all together, it will take a couple of years to fully implement, but it's fair to say that it is already producing results.

But that's not surprising: It's essentially the same plan that Ford used to turn around its operation here in North America.

A familiar plan starts to produce familiar results
The plan involves factory closings and some other organizational restructuring, along with a renewed emphasis on retail sales over less profitable rental-fleet sales, but one big part of it involved a lot of new product for Europe. Ford's global operational blueprint is called "One Ford", and it's an apt name: A key part of the plan is that Ford builds and sells essentially the same lineup of cars and trucks all over the world.

That means that in a place like Europe, where Ford has traditionally offered a small lineup of compact and midsized cars and trucks, it's relatively simple for Ford to bring a bunch of new models to the region. And that's exactly what the company is doing.

For instance, Ford's new Kuga SUV is a twin of Ford's U.S.-market Escape - it's the same vehicle under a different name. It replaced an old Europe-only compact SUV with the same name, and it's a big improvement: Sales were up 33% in July, and Ford recently increased Kuga production at its factory in Spain to keep up with demand.

Ford's latest pocket rocket is selling big, too
New variants of existing models have also done well. Ford's Fiesta is a European mainstay - it's the top-selling car in the U.K. - and the new higher-performance model, the Fiesta ST (shown above) has been a big seller as well. Ford said last week that it has received almost 10,000 orders for the Fiesta ST since it went on sale in March, big numbers for a high-performance small car, and they're boosting production at the Fiesta's factory in Germany by 15% to keep up with demand.

Ford's current Focus has also done well in Europe, just as it has in other parts of the world. It's second to the Fiesta on the U.K. sales charts, and overall sales in Europe were up 13% in July. And Ford's Europe-market commercial vehicles continue to do quite well, with sales of the midsized Ranger pickup up 17% for the month, and nearly double the year-ago period on a year-to-date basis.

The upshot: Once again, "One Ford" is paying off
Long story short? Ford's formula for success, the one that has worked so well in the U.S and in China, is finally taking hold in Europe. For those who hold Ford stock, this is a good sign: Simply breaking even in Europe would add almost $2 billion, or 25%, to Ford's pre-tax bottom line in 2012.

It may be another year, or even two, before Ford really gets to break-even. But if the European recessions are starting to lift, even a little, Ford is very well-positioned to benefit - and if Ford's third-quarter numbers show more tangible progress in Europe, that should provide a nice boost to Ford's stock price.

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Fool contributor John Rosevear owns shares of Ford. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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