UPDATE 2-Ford revamps models in bid to halt European sales slide

Thu Sep 6, 2012 4:24pm EDT

* Ford to sell Edge, EcoSport in Europe as SUV sales rise

* SUV segments only ones to increase in Europe

* German dealer says profit margins close to 1 pct

* Ford expects to lose more than $1 bln in Europe this year

By Laurence Frost and Deepa Seetharaman

AMSTERDAM/DETROIT, Sept 6 (Reuters) - Ford Motor Co showed its revamped European lineup on Thursday, including a new small sport-utility vehicle to challenge Nissan Motor Co's Juke, as the automaker pushes to revive sales and curb mounting losses in the region.

Chief Executive Alan Mulally and other Ford executives previewed several models to some 2,500 dealers, including the EcoSport, a compact SUV that will compete in one of the few growing vehicle segments in Europe.

The showcase was designed to prove to Ford's struggling European dealers that it has attractive new vehicles in the pipeline. So far this year, Ford sales have fallen faster than overall demand in Europe, where the automaker expects to lose more than $1 billion this year and is seeking to cut costs.

"The most important thing we can do is acknowledge the current reality and develop a plan to deal with it," Mulally said at the event held at the Ziggo Dome in Amsterdam.

Through July, Ford sales in Europe have slumped nearly 11 percent, with the overall market down about 7 percent hurt by the deepening economic crisis. In the second quarter, Ford lost $1,125 on every vehicle it shipped to dealers in Europe.

But sales of SUVs, like the Nissan Juke, have been the rare bright spot for the European car industry, executives said. Ford is expanding its SUV lineup and aims to sell 1 million SUVs in Europe over the next six years.

Ford plans to introduce the EcoSport in the next 18 months and will have a new model of its existing Kuga crossover later this year. Ford also revealed plans to sell the next generation of its medium-sized Edge SUV in Europe.

"Over the past five years, the SUV segments are the only ones to have grown in Europe, and it's forecast to continue," Jim Farley, Ford's global marketing chief, said on Thursday.

"Small is where the real growth happens. The small SUV segment in Europe will double in the next five years," he said, adding that sales of medium-sized SUVs may grow by a third.

In addition to the SUVs, Ford also showed the updated Fiesta small car, a European mainstay and the Transit commercial van. Ford also plans to sell the Mustang car in Europe, Mulally said.

Dealers also saw the new flagship Mondeo, based on Ford's U.S. Fusion sedan. The car was scheduled to be introduced in Europe in early 2013, but suppliers were told the launch would be pushed back at least six months so Ford could address production quality issues.

'VERY TOUGH'

The only U.S. automaker to escape bankruptcy in 2009, Ford recovered strongly from that crisis but has since lost some momentum, with Europe emerging as its Achilles heel.

Ford's sales have been hurt by cut-throat competition from newcomers such as Hyundai Motor Co and Kia Motors Co , as well as a shift in demand toward premium brands.

"We're fully aware of the profitability situation across the dealer network in Europe," said Stephen Odell, Ford's head of Europe.

Even in Germany, where the auto market has so far escaped the worst of the regional slump, Ford dealers are feeling the squeeze with profit margins close to 1 percent amid rampant discounting, said Chris Wyrembeck, head of a three-showroom dealership in Dresden.

"It's very tough," he said. "We don't know where we're going to be at the end of the year."

But he added that Ford's push into SUVs is a welcome response to rising German demand in the category, singling out the updated Kuga mid-sized four-by-four as a "good answer to the Volkswagen Tiguan."

As the economic crisis in Europe crimps car demand, Ford and other major automakers are also grappling with excess capacity. Ford's capacity utilization rate in Europe is 63 percent, lower than the 75 percent rate experts say is required to break-even, said Morgan Stanley analyst Adam Jonas.

In a note Thursday, Jonas estimated that about 60 percent of Europe's mainstream brand auto plants will lose money this year. He also recommended that General Motors Co sell or divest its Opel brand in Europe.

To stem its losses in Europe, Mulally said Ford will accelerate the implementation of its "One Ford" plan in the region. Under this strategy, Ford is building global vehicle platforms to maximize economies of scale.

In five years, Ford expects that 71 percent of its European lineup will be built off a global vehicle platform. Separately on Thursday, Ford said it plans to ship Indian-built engines to Europe and other markets.

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