PARIS (Reuters) - Ford’s (F.N) European turnaround is gaining traction as the auto market stabilizes, though there is work to do controlling costs and launching new models before a promised return to profit, the U.S. carmaker’s regional chief said on Friday.
Recovering demand is bringing the 2015 profit goal within reach whether or not rivals follow Ford’s example by cutting plant capacity, Ford of Europe CEO Stephen Odell told Reuters.
“There are enough signals that we’ve leveled out,” Odell said in an interview with Reuters Insider TV, citing October’s second straight monthly gain in regional sales.
Ford expects Western European registrations to stabilize at 13.5 million vehicles this year and return to growth in 2014, Odell said.
While still far below its pre-crisis peak of 18.5 million vehicles, Ford believes the market is well on track for the 15 million forecast underpinning its 2015 profit goal.
“It’s not a wildly optimistic plan,” Odell said. “It doesn’t overly depend upon the industry.”
What it does require, he added, is tight cost control and the successful launch of dozens of models, while lifting prices with higher-end versions under Ford’s new “Vignale” label.
Ford has closed two UK production sites and will shutter a major assembly plant in Genk, Belgium, next year, eliminating some 6,200 jobs in total.
The closures will take out production facilities for 350,000 vehicles from the European industry’s glut of excess plant capacity, estimated at 2 million vehicles annually.
European restructuring costs will wipe $400 million off Ford’s 2013 profit but eventually pay back to the tune of $450-500 million in annual savings, Odell said.
The turnaround plan is part of Ford’s efforts to diversify from its North American profit centre, which currently accounts for almost all of the group’s automotive earnings.
The carmaker last month predicted its European business would post a smaller pretax loss this year than the $1.75 billion deficit recorded in 2012 - a marked improvement on the $2 billion loss forecast in January.
It has also stepped up a European product offensive from 15 new models to 25 over the next five years, starting with the Indian-built Ecosport affordable SUV arriving early in 2014.
At the upper end of the pricing spectrum, the company will introduce the plush Vignale sub-brand on its next Mondeo mid-sized car in 2015, followed by other vehicles.
Ford’s iconic Mustang “muscle” car will also be launched in Europe next year, in another move aimed at boosting the kudos of the brand.
“It’s not about selling hundreds of thousands of Mustangs in Europe,” Odell said. “Our products are undervalued in the market - that’s for me to do something about, and Mustang is a real banner car to do that.”
Editing by Mark Potter