Europe implosion
To say that Europe has been ugly for vehicle sales is an understatement. As my Foolish colleague John Rosevear pointed out, GM has lost $18 billion in Europe since 1999. That overall number might give a brief moment of relief at Ford Motor Company (NYSE:F) if it weren’t for the expectation that it will lose $2 billion this year alone.
While analysts debate whether or not we’ve seen the bottom in Europe’s declining market, Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) aren’t resorting to the same strategies that failed here in the U.S. during our financial crisis. Here in the U.S. Ford managed to lose $30 billion from 2006 to 2008 – a ridiculously large number.
That staggering loss happened because Ford wanted to keep its market share; to do so it was forced to dish out massive incentives – basically handing consumers a couple grand in cold hard cash as they drove off the lot. This time both Ford and General Motors Company (NYSE:GM) realize that’s not a winning solution and have opted to concede market share temporarily in favor of minimizing bottom-line losses.
On the other end of the equation, Ford Motor Company (NYSE:F) hopes that its new models designed for the most popular segments will keep its market share at respectable levels. There’s proof this is working in the latest registration numbers.
Passenger car registrations came in at 1,042,742 for May, which is a 5.9% decline versus last year. If you dig through the numbers, that’s the worst recorded May since 1993. The biggest takeaway for Ford is the change in its registrations and market share since its new models – B-MAX, Kuga (Escape), and Ranger – were recently launched. Through May, Ford Motor Company (NYSE:F) was one of the biggest losers in Europe with its registrations down 12.8%, but it was one of the biggest winners these last two months. In May, Ford’s registration numbers were only down 0.3% and its market share actually increased from 7.5% to 8%.
“We’re starting to see a positive trend emerge over recent months with our new Ford vehicles driving share gains – and especially in the all-important retail arena,” said Roelant de Waard, a vice president with Ford of Europe, in a press release.
Make no mistake, automakers still have a ton of ground to make up and it isn’t looking pretty. Ford executives still stress that they are on pace to break even in 2015 – with the last two months of registration numbers there is reason to believe the statement is possible.
The impact of Ford breaking even in Europe can’t be overlooked. At today’s estimated losses, it would bring $2 billion dollars straight to the bottom line – a significant chunk of earnings. Imagine if, by 2016, Ford is turning a decent profit – that could send Ford’s stock valuation and earnings soaring. That is a real possibility when you consider that Ford lost $30 billion between 2006 and 2008 and then quickly returned to profitability in the U.S. by 2009. Here’s to hoping Ford Motor Company (NYSE:F) can export its turnaround success to Europe – which would be a huge win for investors looking to get Ford at a good price.
The article Ford Stock: Salvaging Europe originally appeared on Fool.com and is written by Daniel Miller.
Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
