DEARBORN (WWJ) – As the major auto companies try to turn around their money losing European operations, Ford of Europe CEO Stephen Odell thinks the continent has hit bottom.
“Our prediction would be that we’re at, or close to the trough. We don’t see any further decline at this point.”
We will likely see all three domestic car companies post big losses in Europe when their second quarter earnings numbers come out in the next few weeks. While Odell said Ford is committed to breaking even in Europe by 2015, the climb back won’t be fast or easy.
“I know that Europe’s in for a long, tough fight,” he said. “But the good news is that Ford is in for that fight, and we’re actually determined that we are going to come out of it as a stronger company.”
Odell, who also leads Ford operations in Africa and the Middle East, spoke to reporters at a roundtable event at Ford’s World Headquarters in Dearborn.
Ford showed some signs of strength in June, with European sales up 6.4 per cent, in a market that was down, overall, by 6.5 percent.
Odell sees new products starting to gain traction in the marketplace, and production cuts allowing Ford to sell vehicles without needing to resort to significant incentives.
But, in a market that’s fallen from 18 million sales in 2007 to 12 million today, you can’t always get the price you want.
“Any market that lost 6 million out of a base of 18 million is a very competitive market. One of the benefits of having fresher product…is the ability to not have to go to the bottom drawer of discounting.”
Ford is in the process of closing several plants, something that’s not easy to do in Europe, and reducing its work force. But, in a market where 12 million workers tie their employment to the auto industry, its difficult to make deep cuts.
“The one issue that, I think, will hold a fast recovery back is just the size of the unemployment,” Odell said. “Twelve point two percent in the Eurozone, thirty five per cent in Spain, and fifty percent youth unemployment in Spain is probably a ticking time bomb.”
The entire auto industry still has about two million excess units of capacity, Odell said, even after deep cuts. He doesn’t see much more capacity being taken out of the system, because that requires extensive negotiations with governments and unions.
“A lot of people are saying that Europe’s going through the same thing the U.S. went through in 2008. The truth is Europe went through it then as well. It just didn’t get out of it.”
The deeper cuts made in the U.S., Odell said, allowed the market here to recover faster.
Ford has been more outspoken than other automakers in expressing concerns about free trade agreements with Japan. Odell says he’s expressed those concerns to labor and government leaders in Europe, but hasn’t made much progress.
Ford has received some positive traction from news reports that Pope Francis has given up his predecessor’s BMW, and travels around the Vatican in a Ford Focus.
“It just proves to me that prayer works.”
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