Even Europeans are shifting to crossovers.
Ford’s European operations are struggling as consumers in the region move toward crossovers. The automaker only sells three in Europe: the EcoSport, Kuga, and Edge. The Kuga and EcoSport reached record sales in the second quarter even as the Kuga is aging. In response to changing consumers trends and thinning margins, Ford may eliminate some products entirely from the region, including the C-Max, Galaxy, Mondeo, and S-Max.
“One of our underlying issues is that we are behind on the shift to utilities and now our portfolio under-indexes on this highly profitable and growing segment,” said Jim Farley, Ford’s head of global markets, during the earnings call earlier this week, according to Automotive News.
Sales for the C-Max, a car Ford singled out it may stop producing in the region, saw sales slide 18 percent in the first half of 2018 to 31,888. Ford could easily phase out the Mondeo, the Fusion’s European sibling, as the company shifts away from cars in the U.S. and eliminates the Fusion from its lineup here.
“The low-performing part of our portfolio represents a majority of our volume, revenue and capital deployed in the region,” he said. This consisted “principally of cars and multi-activity vehicles [minivans] such as C-Max,” Ford CFO Bob Shanks said.
Cars aren’t the only thing hurting Ford. The UK, Ford’s largest market in Europe, is facing issues with its decision to leave the European Union, which is also hurting the automaker. The British pound lost value after Brexit and explains the “majority of our deterioration” in profit in Europe, Farley said, according to the publication.
“Ford cannot afford to just tinker,” Ian Fletcher, principal analyst at IHS Markit told Automotive News. “They have undertaken restructuring in the past and they’re still moaning about the lack of profitability in the region. They have to take a big step or they will be in the same situation down the line.”
Ford will need to rethink its strategy in the region to ensure profitability. Right now, that looks like eliminating cars and going all-in on crossovers of various sizes. Ford will also look toward partnerships, which include a partnership with PSA Group on engines.
Source: Automotive News