Volkswagen AG (ADR) (VLKAY): Why Is Ford Motor Company (F) Losing in Europe?

Lost ground may require a change in plan
A Reuters report this past week suggests that it might be. As the report points out, Ford’s Europe turnaround plan was predicated on the assumption that the Blue Oval wouldn’t lose its share of the overall market, even as it contracted.

That’s one thing that’s not going according to plan. In the first two months of 2013, Ford’s European market share fell 1.2 points, to 6.7%, according to data from the European Automobile Manufacturers’ Association. Ford Motor Company (NYSE:F)’s position as Europe’s second-place brand (after VW) is in peril. More importantly, in January, it raised its estimate of 2013 Europe losses from $1.5 billion to $2 billion.

Clearly, Ford will have to modify its approach if this trend continues. How is the company likely to respond? Ford could return to deep discounting — according to Reuters, its discounts in Europe’s top five markets jumped 30% in 2012, way ahead of the 11% industry average.

Alternatively, Ford could choose to cut further. Mulally emphasized in November that Ford is determined to “match our production to the level of demand” in Europe.

That approach has worked very well for Ford Motor Company (NYSE:F) in North America, where its factories are running at full capacity and then some. Closing factories in Europe can be a very expensive proposition, but if Ford Europe is to return to profitability, it may be money well spent in the long run.

The article Why Is Ford Losing in Europe? originally appeared on Fool.com and is written by John Rosevear.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors and owns shares of Ford.

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