Ford's European branch has had a tough time with three years of losses and making some drastic changes, including closing three factories back in 2013. But 2015 saw the branch make a $259 million profit. The blue oval wants to continue that with a new restructure strategy.
The strategy includes a "voluntary separation" program that will allow workers to leave Ford at their own behest. Ford says this will save around $200 million per year in reduced staffing costs.
Ford will also be eliminating less profitable models” from its product lineup. What models those might be are unknown at this time. It should be noted this elimination will not affect plans to launch seven new or refreshed models this year. Other additions for Ford's Europe lineup include,
- Five crossovers/SUVs in the next three years
- Four more vehicles with the Vignale luxury trim
- Expansion of the electric and hybrid lineup
“In the past three years, Ford of Europe has improved its business in all areas and moved from deep losses to a $259 million profit in 2015. This is a good first step. We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that’s solidly profitable in both good times and down cycles,” said Jim Farley, Ford executive vice president, Europe, Middle East and Africa.
Press Release is on Page 2
FORD ACCELERATES TRANSFORMATION PLAN IN EUROPE TO BUILD VIBRANT AND SUSTAINABLY PROFITABLE BUSINESS
- After returning to profit in 2015, Ford of Europe is accelerating its plan to deliver a vibrant and sustainably profitable business targeting higher profit and pre-tax operating margin in 2016 and 6 to 8 percent operating margin in the longer termRefocusing product strategy to add new vehicles and derivatives in segments with the highest growth and profit potential such as crossovers and SUVs, and eliminating less profitable vehicles over time
- Launching seven new or freshened vehicles in 2016 including Focus RS and new Kuga and Edge SUVs; further enhancing Ford’s brand image in Europe through increased experiential marketing and best-in-class dealer experienceReducing costs in all areas to lower breakeven, help offset rising regulatory costs and invest in Ford Smart Mobility; voluntary separation program announced today to achieve ongoing administrative and selling expense savings of $200 million annually
- Targeting annual manufacturing efficiencies of more than 7 percent and improved capacity utilizationIdentifying new revenue streams through Ford Smart Mobility, including customer loyalty, multi-modal transport services, fleet services and ride services
Ford Motor Company is accelerating its transformation in Europe – including new product, brand and efficiency actions – to deliver improved profits in 2016 and a 6-8 percent operating margin for Ford of Europe in the longer term.
Ford’s European strategy calls for a more streamlined and profitable product line; more emotional and experiential brand communications; and a leaner cost structure to lower breakeven and help offset growing regulatory costs.
“In the past three years, Ford of Europe has improved its business in all areas and moved from deep losses to a $259 million profit in 2015. This is a good first step,” said Jim Farley, Ford executive vice president, Europe, Middle East and Africa. “We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that’s solidly profitable in both good times and down cycles.”
After closing three manufacturing plants in Western Europe since 2013 and reaching an innovative cost-saving agreement with labour unions in Germany, Ford of Europe continues to enhance its cost efficiency and manufacturing capacity utilization.
Ford today initiated a voluntary separation program in Europe supporting a significant reduction in administrative and selling costs to reach industry benchmark levels of efficiency. With the move, Ford of Europe expects to save about $200 million a year on an ongoing basis.
“We are creating a far more lean and efficient business that can deliver healthy returns and earn future investment,” Farley said. “Our job is to make our vehicles as efficiently as possible, spending every dollar in a way that serves customers’ needs and desires, and creating a truly sustainable, customer-focused business.”
Ford of Europe said it would continue to drive improvements in its manufacturing operations, targeting efficiencies of greater than 7 percent year-over-year going forward, and improving its manufacturing capacity utilization.
After launching more than 30 new and refreshed vehicles since late 2012, and increasing market share in each of the past two years and boosting sales 10 percent in 2015, Ford of Europe will continue to strengthen its vehicle line with plans to:
- Launch seven new and refreshed vehicles in 2016, including the Focus RS performance hatch and the new Kuga and Edge SUVs. Streamline core model line-up to eliminate less profitable vehicle lines over time
- Launch five new vehicles to compete in the SUV and crossover space in the next three years, starting with new Edge in the second quarter. SUVs remain Europe’s fastest-growing market segment, and Ford expects to surpass 200,000 SUV sales in Europe for the first time in 2016 – a growth of more than 30 percent compared with 2015
- With the launch of Focus RS, joining Focus ST, Fiesta ST and Mustang, Ford of Europe expects record performance car sales in Europe in 2016 of about 40,000 vehicles
- Expand upscale Vignale line and customer experience from one model today – Mondeo Vignale – to at least five Vignale models by 2017
- Introduce new plug-in hybrid, hybrid-electric and full electric vehicles in Europe by 2020 – part of Ford’s previously announced $4.5 billion investment in electrified vehicle solutions
- Ford this year will offer eight vehicle lines in Europe with sophisticated all-wheel drive or four-wheel drive technologies, compared to three models in 2012. Ford expects to sell about 140,000 all-wheel drive and four-wheel drive vehicles in Europe in 2016 – a 120 percent increase compared to 2014
- Continue to invest in and strengthen Europe’s best-selling line-up of commercial vehicles, including new powertrain and technologies for Transit Custom and Transit
- 2-tonne, and a freshened Ranger – Europe’s No.1 top-selling pickup for 2015
“We are creating a more exciting and distinctive Ford line-up in Europe,” Farley said. “When we play to our strengths, we can compete and win in Europe – even against premium brands.”
Strengthening the brand
Building on its improving brand image in Europe, Ford plans to reach new customers through its exciting new products, increased experiential marketing and best-in-class dealer and customer experience with the completion of 500 new, state-of-the-art flagship FordStores in major urban areas.
Ford is identifying opportunities for new revenue streams in Europe – recurring and potentially higher margin – as part of Ford Smart Mobility. Key areas of focus include customer loyalty, multi-modal transport services, fleet services and ride services.
As an initial step in January, Ford unveiled FordPass – a platform that reimagines the relationship between automaker and consumer. FordPass members can talk to a personal mobility assistant to help with travel arrangements, reserve and pay for advance parking, earn loyalty points, schedule service and much more. FordPass launches in Europe later this year.
FordPass also includes the opening of FordHubs, where consumers will be able to explore Ford’s latest innovations, learn about its mobility services, and experience exclusive events, with the first FordHub in Europe opening in London this year.
“We are investing in Ford Smart Mobility, which will deepen our customer relationships and reduce our conquest marketing costs,” said Roelant de Waard, vice president, Marketing, Sales and Service, Ford of Europe. “There is a huge opportunity in Europe to give our customers what they want, sometimes before they even know it, by anticipating their needs through data and data analytics.”