What Will Ford Do in Slower Europe? Grow, Grow, Grow
AMSTERDAM (TheStreet) -- How does Ford (F) respond to the sharp downturn in Europe's economy?
It's easy: roll out new products. On Thursday, Ford unveiled a half dozen new products for the European market, including a new Fiesta, a new Mondeo, new small SUVs, a newly designed Transit Connect and even an American icon, the Mustang, that will come to Europe. Ford plans to sell 15 new and redesigned vehicles in Europe over the next five years.
The Alan Mulally playbook has a page on this, of course -- in a 2009 interview with TheStreet, the Ford CEO declared: "The way to survive is to reduce your production to the real demand (and) at the same time accelerate the investment in new products so that when you come out on the other side, you are there with the vehicles that people want."
Nothing has changed. "Ford took a point of view nearly six years ago that we wanted to serve all our customers around the world with a complete family (of vehicles)," Mulally said Thursday, at the product rollout in Amsterdam. "We are going to invest and continue to invest even through recessions."
Added Stephen Odell, CEO of Ford in Europe: "Despite the economic crisis, we are investing in the future. We want to make the statement loud and clear that we believe there is a great opportunity in Europe.
"The economic and business conditions we face are brutal," Odell said. "We don't expect things to get easier anytime sooner." Still, Ford expects the European market to grow 20% to 23 million vehicles over the next five years.
"As some may back off, Ford is increasing its investment," Odell said. "We will be aggressive in increasing our share."
During Ford's second-quarter earnings call in July, Mulally and Chief Financial Officer Bob Shanks made it clear they will take action to halt losses in Europe. During the quarter, the pretax operating loss in Europe was $404 million, and Ford said projected full-year losses in the region will exceed $1 billion.
"We absolutely have overcapacity now," Mulally said then. "We're bringing production down because demand is not there." He also emphasized, however, that Ford's solution in Europe will include not simply cost reductions but also revenue gains largely generated by new product introductions.