Focus on Europe

In Europe, we are in the process of implementing our transformation plan as announced in late 2012. Our actions are designed to increase cost efficiencies, address manufacturing overcapacity, accelerate product development and introduction, and strengthen our brand.

We completed the planned closures of two manufacturing facilities in the U.K. in 2013 and we will close our Genk, Belgium, manufacturing facility at the end of 2014.

We recognize the impact our actions have on many employees and their families, and we have been working together with all stakeholders as we make these changes to our business in Europe. In total, 6,200 positions – or about 13 percent of Ford’s European work force (excluding Russia) – are affected from the plant closures in 2013 and 2014, including the salaried head-count reduction equivalent of 400 positions in late 2012. Wherever possible, we have been achieving employee reductions through enhanced employee separation programs and, with regard to our U.K. facilities, voluntary means and redeployment to other Ford locations.

The plant closures will reduce our installed European vehicle assembly capacity, excluding Russia, by 18 percent (or 355,000 units) and yield gross annual savings of $450 million to $500 million.

Rightsizing manufacturing footprint and cost efficiency is very important, but cost actions alone are not enough. This is why our One Ford transformation plan for Europe focuses on all elements of the business – product, brand and cost.

We continue to strengthen our brand through wide-ranging efforts. For full-year 2013, our European retail sales – sales to private customers – increased 14 percent, driving our retail market share up a full percentage point to 8.2 percent (based on the five major markets). The improvement in retail sales was the result of a strategic shift in 2013 to target healthier sales channels and reduce sales to rental fleets and reduce dealer self-registrations. Retail sales are more profitable and better for brand image and residual values.

Our retail success speaks to the strength of our new vehicles and products, and demonstrates the importance of continuing to invest in new vehicles even in the most difficult economic environments. Forty-three percent of all Ford vehicles sold in Europe in 2013 were either new or significantly refreshed models, including the B‑MAX, Fiesta, Focus Electric, Kuga, Transit Connect, Tourneo Connect, Transit Custom, Tourneo Custom and Explorer in Russia.

Ford is continuing its aggressive new vehicle and technology rollout in all segments and markets. In late 2013 we committed to accelerate our new vehicle introductions in Europe with at least 25 new vehicles in five years from September 2012, accelerated from 15 new vehicles in five years announced in late 2012. This includes the launch of 10 new vehicles in 2014.

We’re starting to see some early green shoots of economic recovery in Europe, but it is still very slow and fragile. In 2014 the market could be anywhere from 14 million to 15 million in our Europe 20 markets, compared to 13.8 million in 2013. But any recovery will be slow and modest. We’re still only projecting a 15 million market in 2015, far away from the 18 million industry market in 2007.

Ford of Europe’s return to profitability is supported by the following:

• A gradual recovery in European vehicle industry volumes;
• Improved margins through a strengthened brand and a richer product mix;
• Improved segment share with the launch of our expanded portfolio of sports utility and commercial vehicles, covering more market segments; and
• A more efficient manufacturing footprint, including significantly improved plant utilization.

The Europe transformation plan continues to progress well and the business unit remains on track to achieve profitability in 2015.