Obviously this devastating condition is not unique to Ford. Almost all American companies who have business operations in Europe are feeling the pinch of the contraction in the European economy. The huge financial crisis in Europe is creating a sudden lag in US exports as European customers are buying less US products and services. From consumer nondurable goods companies like Kraft Foods Group Inc (NASDAQ:KRFT) to electronics companies like Koss Corporation (NASDAQ:KOSS), all of them are facing a shrinking top line. All of these companies will continue to experience this difficult situation until the European crisis eases, and Ford will definitely not be an exception. Keeping this in view, the company, in its 2103 guidance, reported an anticipated loss of $2 billion next year.
When an immediate improvement in the economic condition in Europe is not expected, the only way to ward off the slump in sales is to devise new strategies to sustain in the market, and Ford is very much on the right track. For the time being, Ford is taking some strategic steps to ward off the adverse market scenario.
What lies next?
As Ford’s European factories have been running at almost 60% capacity, the first step that the company has taken to lower the costs and make every sale more profitable is to shut down three of its factories. The company has also signaled that if necessary Ford will close more of its factories.
Again, Ford is also trying to bring a change in its product line as well. Earlier Ford was offering locally designed expensive vehicles in Europe, but now Ford has plans to launch low cost vehicles in Europe that should definitely increase sales volume as well as their market share. Ford is also planning to apply their “One Ford” strategy in Europe, which means it will now produce customized vehicles for its European customers. This has been a tried and tested strategy for Ford, and when the company was losing its US market share this strategy not only helped the company to regain it, but also post continuous profits in the US. So investors can be a bit relieved this time as this strategy has already turned out to be fruitful for the company once.
While the company is restructuring its operations in turbulent markets like Europe, it is also expanding operations in growing markets like China. Ford is expecting to double their production capacity in China, and is planning to invest $760 million to build a new assembly plant. As we’ve already seen, the main reason behind the surging sales in the Asia-Pacific-Africa region is Ford’s Chinese operations, and a further increase in the production capacity will definitely turn out to be fruitful for the company in the coming years.
Foolish Bottom line:
Ford has still a long way to go, but it’s on the right track to success. Adding to all the above factors, which promise a stronger financial performance for the company in the near future, Ford has added one more reason for investors to be happy: the company has recently announced that they are doubling their dividend payment to shareholders. So investors buckle up and get ready to add an accelerating stock in your portfolio.
The article Zoooooom……Here Comes Ford originally appeared on Fool.com and is written by Satarupa Bose.
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