Warning: Ford Oracle Indicates Crashing EU Market. Ford's Own Numbers Worse
ACEA hasn’t released European numbers for May yet (they are expected within the next days,) but in case you have a financial, business, or other interest, be advised that the results will be grim. How do we know that? By reading a press release by Ford Europe. Ford has consistently jumped the gun on releasing European numbers, and has turned into TTAC’s canary in the EU coal mine. What TTAC’s patent-pending GM indicator is for China, Ford becomes for Europe. Executive summary: May was another blood bath for the EU. Ford underperformed the EU market nearly 2:1.
Caveat: Ford has a somewhat unorthodox view of the European market. The EU has 27 member states. Ford begs to differ. Ford has an EU 19, and then they have an EU 21, which includes non-EU markets such as Turkey and Russia. Lastly, they have an EU 51, which comprises the EU 21, plus such notable European states as Egypt, Morocco, Tajikistan and a cast of many that would get you really bad grades in geography class. Therefore, Ford’s “Europe” numbers must be taken with a big bag of salt. Past experience shows that their EU 19 number comes closest to final official EU 27 results. We’ll stick with Ford’s EU 19 in this article.
Ford sees a drop of 7 percent in the overall European market (caveats see above) in May 2010 compared to the same month in the prior year. Judging from past experience, this indicates an even steeper drop for the overall market when ACEA’s official EU numbers come in. Most likely, May numbers will be worse than April numbers.
Ford’s sales in the EU 19 dropped by 13.9 percent.
Ford’s market share is down 0.7 percent to 8.2 percent in the EU 19. This could mean a change in position with current #5 GM when the ACEA numbers come in. We’ll see. Too close to call.
Again, Ford saw it coming: “Our primary focus at Ford is to improve our profitability – and we successfully achieved this in the first quarter of the year” said Ingvar Sviggum, vice-president of Marketing, Sales and Service at Ford of Europe in a press release. “We’ve long been prepared for the slow-down in the market and are not surprised that many of our competitors continue to react with the tactic of heavy discounting, which we believe is ultimately unsustainable and damages the brand.”
Ford “will reduce in a controlled way our share and volume in the areas of our business that are less profitable; we will improve our margins and protect the re-sale value of our products.” Uh-oh.
Fiesta (31,400), Focus (22,100), and Transit (10,400) were Ford’s three top-selling vehicles in the EU19. Detailed numbers in their press release. Just be mindful of Ford view of the geography.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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The author goes to great pains to remind us how meaningless the numbers are, but seems to build an article on the same foundation. I think reality is somewhere in between and I suspect he thinks the same. (Otherwise why bother, right?) Were the numbers expected? Well, maybe. Are the numbers surprising? To me, no. They actually make sense if you zoom out and look at the big picture. Speaking very (very!) generally, Ford is actually trying to make money off of the cars they sell (instead of perpetually teetering on the verge of bankruptcy in the long term). You can see that in it's U.S. pricing and the pricing should follow the same lines in Europe. The problem in Europe is that people in Europe have less disposable income than people in the U.S. to begin with (they get all this cool "free stuff" remember.) Now factor in Ford prices going UP recently and... How many cars are you gonna sell over there? Really? Next: add in what is called a Greek, but is in reality an entire European economic collapse -DURING- a (admit it now, double dip) recession for this reporting period - and the most you can really take away now is "oh... well, yeah- I guess the math adds up on this one." Dosn't look good at the surface, but makes sense in context. I would say it more reflects a "new reality ?.0" rather than a hiccup. Europe's finance problems, and that of their people look to be long-term, if not permanent.(Hopefully not terminal, but I do wonder about it.) If Ford makes that adjustment early, good for them? Or is that just so much hyperactive thrashing in a market? I am also curious about what is going on in other markets such as: central/South America, China/India. I would suspect the markets would be slightly more stable than Europe, but still wouldn't be surprised at a 5%-or-under decline for Ford there either. They are right to focus on long-term stability and selling profitable cars to people who can afford to pay for them - well, there have been worse business plans, but, this one is not always pretty, and these numbers show why. It will be another year or two before we see if GM (and Chrysler) can do the same with their new products. We know they might just make it, if we are having the same conversation about those two brands in a year (or, my guess would be two.) Interesting times. Plenty to think about.