Ford of Europe to outlast shrinking market by realigning production plans

Ford and Sollers produce the Explorer and Transit with joint venture in Russia

2012/03/27

Summary

 Ford of Europe attempts to outlive shrinking European markets due to the sovereign debt crisis by launching a number of new models and realigning production across Europe. Ford will add compact cars, such as the new B-segment model B-Max, and employ the fuel-efficient engine EcoBoost to increase high-mileage models.

 Ford's European plants will integrate production by segment to improve capacity utilization and productivity. Meanwhile, Ford and Sollers established a joint venture to expand production in the rising Russian market. Ford plans to produce the heavy SUV Explorer and the medium commercial vehicle Transit at two plants of the joint venture in the Republic of Tatarstan.

 Ford of Europe had a sales volume of 1.602 million units in 2011, up by 1.8% over the previous year. According to Ford's projection announced in January 2012, the market scale of 19 European countries will decline to 14 million to 15 million units in 2012 from 15.3 million units in 2010, while Ford expects its market share to stay unchanged from the previous year's level of 8.3%.

 The 2011 results of Ford of Europe showed an increase in revenue by 13.3% over the previous year, while pre-tax profits resulted in negative 27 million dollars. Ford expects that the pre-tax loss will balloon to five million to six million dollars, if the European markets shrink in 2012 as expected.

Related reports: Ford (May 2011), Ford of Europe (April 2011), GM of Europe (January 2012)



Model plans: Ford to launch B-Max, new Kuga, and Focus EV in 2012

 Ford of Europe plans to launch at least 20 new model vehicles including significantly freshened models over the next three years from 2011 to 2013. It intends to expand sales by launching a massive number of new model vehicles in the shrinking European markets due to the sovereign debt crisis.

 In 2012, Ford will launch the light MPV B-Max built on the Fiesta platform, the new compact SUV Kuga with a larger trunk, and the Focus ST, a high performance version of the compact sedan Focus.

 Ford will launch five electric models by 2013. It already launched an all-electric small commercial van Transit Connect in the summer of 2011. It will launch an all-electric version of its flagship model the Focus in 2012.

Ford's new models to be launched in 2011 to 2013

Model Launch Outline
B-Max September
2012
 The B-Max is a light MPV built on the Fiesta platform. The pillar-less style and the sliding rear doors realize easy access for passengers to the vehicle. It comes with a 1.0-liter EcoBoost gasoline engine. The B-Max will be the first European model equipped with the telematics system SYNC. It will be produced by the Romanian plant. The competitor model is the Opel/Vauxhall Meriva.
New Kuga 2012  The new Kuga is a compact crossover SUV built on the Focus platform. Its North American version is named the Escape. It has a larger trunk by 82 liters than the current model. It has a new tailgate that can be opened and closed by sweeping the foot under the rear bumper, and the telematics system SYNC. It also has an improved 4WD mechanism and an additional version which has a 1.6-liter EcoBoost engine.
New Focus ST 2012  The new Focus ST is a high performance version of the Focus. It has a 2.0-liter EcoBoost engine and a six-speed MT. It produces 250 PS and 360 Nm of torque at max.
New Fiesta ST 2013  The new Fiesta ST is a high performance version of the Fiesta. Its output is improved by 20% compared to the current model. It comes with a 1.6-liter EcoBoost engine with 180 PS and 24.5 kgm of torque. Acceleration from zero to 100 km/h is obtained within seven seconds, and the top speed is greater than 220 km/hour.
New
Transit/Tourneo
To be
determined
 The new Transit and Tourneo are people movers and commercial vans for Europe and Asia. The passenger car version accommodates eight passengers at most. The commercial vehicle version has a maximum load of one ton. The concept vehicle unveiled in March 2012 is dynamically designed like a passenger car. It has the latest driving assist system and the telematics SYNC.
Ford's EV/HV/PHV to be launched in Europe by 2013
Model Launch Outline
Transit Connect
Electric
Summer 2011  The Transit Connect Electric is an all-electric version of the small commercial van Transit Connect integrated with the Azure Dynamics' electric power train. The EV travels 80 miles per charge. The top speed is 75 miles per hour.
Focus Electric September
2012
 The Focus Electric is an all-electric version of the Focus. It has a fuel efficiency in the city equivalent to 110 mpg, which is greater than the Nissan Leaf by 6 mpg. It travels 70 to 100 miles per charge.
C-Max Hybrid 2013  The C-Max Hybrid is an HV version of the small MPV C-Max.
C-Max Energi 2013  The C-Max Energi is a PHV version of the small MPV C-Max.
HV model 2013  The HV model is a next generation HV built on the global C-platform. It will be launched in 2012 in North America.

Source: Ford Press Release 2012.2.22/2012.3.2/2012.3.5, Automotive News Europe 2011.3.22/2012.2.21/2012.3

 



New technologies: one-liter EcoBoost engine and telematics system SYNC

 Ford of Europe has begun to equip the Focus with the three-cylinder one-liter EcoBoost, a fuel efficient engine, of which development was driven by Ford engineers across Europe. The engine is as powerful as the conventional 1.6-liter engine, while its CO2 emissions are significantly reduced. Ford will employ the one-liter EcoBoost for other European market models, with plans to spread the technology around the world.

 Ford also started to employ the telematics SYNC in Europe in 2012, which has already been rolled out in the US. The B-Max will be the first European model to incorporate the SYNC. By 2015, Ford will equip 3.5 million units with the system in Europe. The SYNC has a voice recognition feature, an emergency call application in the event of a serious accident with an airbag deployment, and a mobile phone integration function.

 Ford intends to expand sales of high-priced models in Europe, utilizing high fuel efficiency and its cutting edge technologies such as the telematics system SYNC.

Ford begins production of the Focus with the three-cylinder one-liter EcoBoost engine

Mechanism  Ford began to produce the Focus equipped with a three-cylinder one-liter EcoBoost at the Saarlouis Plant in Germany in February 2012. The engine is the smallest displacement engine that Ford has ever made. It was developed by Ford engineers across Europe. The combination of the direct injection, turbo, and variable-valve timing mechanism realizes low-fuel consumption but delivers sufficient torque from a low revolution range. Ford will incorporate the one-liter EcoBoost in the European models of C-Max and B-Max with plans to spread the technology to the worldwide markets.
Performance  The Focus equipped with a 1.0-liter EcoBoost Engine consumes fuel at 4.8 l/100km, emits CO2 at 109 g/km in the 100 PS maximum output version, and at 5 l/100km and at 114 g/km in the 125 PS version. The maximum output of 125 PS and 170 NM/1,400 to 4,500 rpm of the maximum torque is equivalent to the performance of the 1.6-liter natural aspiration engine.
Production  Ford invested 134 million Euros and set up a production line in the Cologne Engine Plant in Germany. The plant has produced one-liter EcoBoost engines since January 2011. The plant produces 350K engines per year. Since the beginning of 2012, the Craiova Plant in Romania has produced the engine. The plant will also produce 350K engines per year. The annual production in Europe will come to a total of 700K units. Ford plans to produce total 1.3 million units per year across the globe in the future.

Source: Press Release 2011.11.9/2012.2.2、fordmedia.eu website

Ford to deploy the telematics system SYNC in Europe

Deployed worldwide  Ford has already rolled out the telematics system SYNC in the US since 2007. It will also roll out the system in 2012 in Europe and Asia as well. The SYNC-equipped Ford vehicles run into four million units in the US. Ford projects that nine million units of the SYNC-equipped vehicles will be on the roads on the globe by 2015. In Europe, Ford will launch the SYNC-equipped B-Max in 2012, and increase SYNC-equipped models in series. By 2015, Ford plans to incorporate the SYNC at least in 3.5 million vehicles in Europe.
Features  The SYNC is an onboard telematics system jointly developed by Ford and Microsoft. The system contains a variety of features, including voice recognition, traffic alerts/turn-by-turn directions, provision of latest news and weather forecasts, connection with digital media such as the iPod, a direct call system in the event of accidents with airbag deployment, mobile phone integration, provision of direction/information by an operator, and business search directory.

Source: Press Release 2012.1.9

 



Ford to reorganize the production structure of European plants, and to establish a joint venture with Sollers in Russia

 In June 2011, Ford of Europe announced to restructure the production in Europe to support the sales expansion strategy of launching new models. It consolidated production of the B-segment and C-segment vehicles, and expanded production of low-fuel consuming engines. It is increasing the capacity utilization and the productivity of the plants across Europe, while taking measures to maintain the flexibility of the plants.

 Ford and the major Russian OEM Sollers established a joint venture in Russia which is expected to become the largest market in Europe around 2015. In addition to Ford's existing Russian plant, the Sollers Tatarstan Plants will produce Ford vehicles to meet expanding demand.

Ford's plans to restructure European plants (announced in June 2011)

Country Location Production model/item Remarks
Germany Cologne * The Cologne Plant will produce the face-lifted Fiesta in 2012, and the next generation Fiesta in the future.
* The plant has produced 1.0-liter EcoBoost engines since the latter half of 2011.
The plant will be dedicated to building B-segment vehicles.
(It employed 50 more workers)
Saarlouis * The Saalouis Plant will produce the Focus Electric from the latter half of 2012.
* The plant will continue to produce all models of the Focus, and will build the next generation Focus models.
The plant will be dedicated to building C-segment vehicles.
(It employed 150 more workers)
Spain Valencia * The Valencia Plant will produce the next generation Transit Connect and the next generation Kuga in 2012.
* The plant will continue to produce the new C-Max (total volume production for Europe), and 2.0-liter EcoBoost engines.
The plant will be dedicated to building C-segment vehicles.
(It additionally employed hundreds of workers)
Turkey Kocaeli * The Kocaeli Plant will produce the next generation Transit and a new light commercial vehicle model.
* The plant will continue to work on engineering for the next generation Transit Connect which will be produced in Spain.
The plant is owned by Ford Otosan (a joint venture company).
Romania Craiova * The Craiova Plant has produced the new model B-Max since the beginning of 2012 (under the plan to produce 60K units in 2012, and 100K units in 2013).
* The plant will produce a second B-segment model in the future.
* The plant has produced the 1.0-liter EcoBoost engines since the beginning of 2012.
The plant will be dedicated to building B-segment vehicles.(Ford invested at least 675 million Euros in the plant to update the facilities.)
Ford's other European plants
Belgium Genk Galaxy, Mondeo, S-Max
UK Southampton The Southampton Plant will produce the chassis cabs for the next generation Transit
Russia St. Petersberg The St. Petersberg Plant produces the Focus and the Mondeo The plant is owned by Ford Sollers (a venture company).
Tatarstan
(Elabuga,
Naberezhnye Chelny)
The Tatarstan Plants will produce the new Explorer and the Transit in 2012.

Source: Ford Press Release 2011.6.14, Ford of Europe Fact Sheet - Full Year 2011, Automotive News Europe 2012.3.5
(NOTE) According to the news report in March 2012, Ford is planning to reduce production at two German plants and the Belgium Plant (Automotive News Europe in March 2012 and Automotive News on March 7, 2012).

 

Russia: The joint venture of Ford and Sollers starts operation

 Ford established a joint venture with a Russian major OEM Sollers on a fifty-fifty basis. The joint venture began operations in October 2011. It has been named Ford Sollers with headquarters in Moscow. This company will receive a long-term loan of 36 billion rubles from the Russian Development Bank, Vnesheconombank, to update its production facilities.
 Ford Sollers took over the Ford plant in St. Petersberg and Sollers' two plants in Tatarstan to produce Ford passenger cars and light commercial vehicles. At the Tatarstan plants, the joint venture will produce the large SUV Explorer and the medium commercial vehicle Transit in 2012. In addition to production of vehicles, the venture company will be engaged in engine manufacturing, pressing, R&D activities, and import and sales of Ford products and parts.

Source: Ford Press Release 2011.10.1

 



Sales volume up by 1.8% to 1.602 million units in 2011, while expected to fall below the previous year level in 2012

 Ford of Europe had a sales volume of 1.602 million units on a wholesale basis, up by 1.8% over the previous year in 2011, owing to brisk sales of the new Focus launched in March 2011 and the C-Max compact MPV. The sales volume increased from the first to third quarters on a year-over-year basis, but that of the fourth quarter declined due to the sovereign debt crisis in Europe. Its total share of 19 European markets declined by 0.1 percentage point to 8.3%.

 According to Ford's forecast, the total European market scale of 19 countries will be 14 million to 15 million units in 2012. Ford projected that the market scale will fall under the 2011 record of 15.3 million units due to the sovereign debt crisis and austerity policies. The automaker expects that its share will remain unchanged from the previous year level according to an announcement in January 2012.

Ford: sales volume by region (wholesale)

(1,000 units)
North
America
South
America
Europe Asia Pacific
Africa
PAG Special
items
World
2005 3,410 335 1,753 505 764 6,767
2006 3,051 381 1,846 589 730 6,597
2007 2,890 436 1,918 535 774 6,553
2008 2,329 435 1,820 464 359 5,407
2009 1,927 443 1,568 604 324 4,866
2010 2,413 489 1,573 838 211 5,524
2011 2,686 506 1,602 901 5,695
Source: Ford 2011 Q4 and Full Year Earnings Review and 2012 Outlook
(NOTE) 1. The wholesale volume includes Ford brand vehicles (those produced by its non-consolidated affiliate companies), vehicles produced by Ford and supplied to other companies under the OEM contract, and China brand vehicles made by Jiangling Motors, its joint venture in China.
2. The sales volume in Europe includes Ford brand vehicles sold by its non-consolidated affiliate companies in Turkey and Russia. The non-consolidated sales volumes were 67K units in 2010 and 114K units in 2011.
3. Ford sold out Aston Martin, one of the PAG companies, in March 2007, Jaguar/Land Rover in June 2008, and Volvo in August 2010. The sales volume of the PAG was zero in 2010. The 2010 sales volume of Volvo (211K units) is included in the special item.

 

Ford of Europe: quarterly sales volume

2010 2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Sales volume
(1,000 units)
Ford of Europe 416 420 340 397 432 422 357 391
Ford 1,345 1,517 1,273 1,389 1,403 1,519 1,346 1,427

Source: Ford 2011 Q1/Q2/Q3/Q4 and Full Year Earnings Review and 2012 Outlook

 

Ford of Europe: sales volume by passenger car model

(unit)
2005 2006 2007 2008 2009 2010 2011
C-Max 136,117 112,162 124,108 109,118 75,604 66,510 127,092
Fiesta 319,992 369,907 373,086 342,027 483,744 425,331 372,977
Focus 410,466 461,321 423,070 384,619 333,714 286,376 308,747
Fusion 73,153 93,535 82,726 70,325 57,606 35,800 18,479
Galaxy 32,931 25,475 34,394 30,819 26,182 24,146 27,371
Ka 68,560 61,750 52,109 47,664 108,342 93,890 73,821
Kuga 10 27,083 64,773 72,878 68,564
Maverick/Escape 5,256 4,700 2,553 663
Mondeo 157,196 135,095 152,061 167,394 117,565 96,898 86,433
Mustang 680 752 612 906
Ranger 1,312 504 790 701
S-Max 38,648 70,840 55,250 43,260 45,773 47,575
Streetka 8,000 1,430
Transit 8,604
Transit Connect/
Tourneo Connect
4,233 2,386 5,696 4,506 3,148
Transit/Tourneo 11,933 13,818 16,911 15,294 15,288 16,087
Other 899 868 919 1,350 2,612 5,781 2,767
Ford Brand total 1,227,399 1,320,466 1,336,792 1,259,336 1,331,844 1,168,671 1,149,913
Aston Martin 2,624 3,809 1,909
Jaguar 45,803 42,439 33,755
Land Rover 87,792 90,492 105,568
Volvo 247,143 246,392 268,284 225,764 207,928
Other 59 58 50 42 39 26 13
Ford of Europe total 1,610,820 1,703,656 1,746,358 1,485,142 1,539,811 1,168,697 1,149,926

Source: Automotive News Europe 2012.3
(Note) The sales volumes are for the 18 western European countries plus Hungary up to 2005. They are for the 28 European countries in 2006 and 2007 and the 29 countries in 2008 and later.

 

Ford of Europe: new vehicle registrations and market share in Europe

New vehicle registrations (unit) Market share
2010 2011 2010 2011
Euro 19 Industry Industry 15,308,500 15,287,600
Ford 1,279,900 1,263,100 8.4% 8.3%
Euro 22 Industry Industry 18,182,700 19,005,400
Ford 1,499,900 1,528,700 8.2% 8.0%
Total Euro 51 Ford 1,541,600 1,578,400

Source: Ford of Europe Fact Sheet - Full Year 2011/2010
(Note) Euro 19 markets are Western and Eastern European countries and Baltic states. Euro 22 markets are Euro 19 plus Russia, Turkey and Romania. Total Euro 51 markets are composed of Euro 22 plus CIS and North African countries.

 



Key market conditions: Sales in Germany and Russia increase by 15.7% and 32.3% in 2011

 Ford sold 342K units in 2011 in the UK, the largest European market for Ford. The sales volume remained flat from the 2010 level. Ford continued to lead the market at a 15% share equal to the previous year's level. The UK market has shrunk since the financial crunch in 2008, and it has hovered at 2.2 million to 2.3 million units for these years.

 On the other hand, the German market was up by 9.6% over the previous year to 3.5 million units in 2011. Ford's sales volume increased by 15.7% to 250K units. Its market share increased by 0.5 percentage points to 7.4%.

 The Turkish market shrank due to the financial crunch, but Ford's sales recovered thanks to the governmental sales promotion policy implemented in 2009. The market scale expanded to 900K units in 2011. Ford's 2011 sales volume in Turkey exceeded the pre-financial crisis level to 140K units. Ford's share has expanded to 15.8% for these years.

 The Russian market scale halved due to the financial crisis in 2009, but it recovered to the pre-crisis level to 2.7 million units in 2011. Brisk sales of the new Focus and Transit boosted Ford's sales by 32.3% over the previous year to 124K units in 2011. Ford began operation of Ford Sollers, a joint venture with Sollers, in October 2011. Ford will launch more products from now on to catch up with the expanding Russian market.

Ford of Europe: sales volume by major market (wholesale)

(1,000 units)
2007 2008 2009 2010 2011
UK 414 415 354 341 342
Germany 230 250 286 216 250
Turkey 100 78 79 130 140
Russia 180 183 74 93 124
Other markets 994 894 775 793 746
Ford of Europe total 1,918 1,820 1,568 1,573 1,602

Source: Ford Form 10-K Q4 2011

 



Business results: Pre-tax profit is negative 27 million USD in 2011, expecting to have another negative result in 2012

 Ford of Europe had sales of 34 billion dollars in 2011, up by 13.3% over the previous year. On the contrary, pre-tax profit resulted in negative 27 million dollars (it was positive 182 million dollars in 2010). Pre-tax result was positive in the first half then fell to negative 306 million dollars in the third quarter, and negative 190 million dollars in the fourth quarter. Spiking raw materials costs and profit loss of the subsidiaries surpassed the positive figures earned by an increase in sales volume and cost reduction.

 Ford expects sales to decline further due to the sovereign debt crisis in 2012. According to the news report in March 2012, Ford said it is difficult to predict but it sees that the pre-tax loss may expand to 500 million to 600 million dollars, if the total European market scale of 19 countries shrinks to 14 million units (it was 15.3 million units in 2011).

Ford of Europe: business results

Revenue (billion USD) Pre-tax profit (million USD)
2010 2011 2010 2011
Ford of Europe 30 34 182 (27)
Ford 129 136 7,149 8,681

Source: Ford 2011 Q4 and Full Year Earnings Review and 2012 Outlook

 

Ford of Europe: quarterly business results

2010 2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue
(billion USD)
Ford of Europe 7.7 7.5 6.2 8.1 8.7 9.0 7.8 8.3
Ford 31.6 35.0 29.9 32.5 33.1 35.5 33.1 34.6
Pre-tax profit
(million USD)
Ford of Europe 107 322 (196) (51) 293 176 (306) (190)
Ford 2,135 2,847 1,887 280 2,776 2,606 1,846 1,453

Source: Ford 2011 Q1/Q2/Q3/Q4 and Full Year Earnings Review and 2012 Outlook

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