Ford’s Plan to Grow Profits in Europe

In the face of slow-projected growth in the European auto market, Ford of Europe has a plan.

While Ford’s large trucks and SUVs have remained popular in the United States, with sales from the high desert of West Valley City, Utah to the humid woodlands of the South, European consumers were more interested in smaller car options such as the Ford Fusion.

However, European consumers’ tastes are changing, and Ford is planning to capitalize on that. Sales of SUVs and crossovers are now increasing all over Europe, and the automotive giant is planning to increase production of larger vehicles accordingly. Larger vehicles have a significantly higher profit margin than the small cars — such as the Ford Fusion — typically preferred by European consumers.

Ford is already rolling out the new Edge SUV in Europe in the first half of 2016, and expects total SUV sales to grow by 30 percent. If all goes well, Ford will break the 200,000 mark for European SUV sales by the end of the year.

Rather than introducing the brand’s Lincoln line, commonly found across Utah and the U.S., for its European consumers Ford is planning to introduce a super premium Vignale brand. Ford is currently offering a Vignale version of the Mondeo, known as the Fusion in Utah and throughout the U.S., and is planning to add new Vignale versions for its other vehicle offerings.

Another aspect of Ford’s new European plan is a focus on cost-cutting. The American automaker is looking to cut a number of “white-collar” jobs, reducing administrative costs by $200 million annually. Ford executives cited the automotive market’s cyclical nature as a major reason for the decision, and a desire to meet a pretax operating margin of 6 percent to 8 percent.

In the challenging European market, Ford is making strides by adding more large vehicle and crossover SUV offerings, cutting costs and finding a luxury niche for its new Vignale brand. Hopefully, the American auto giant will be able to keep European profits in the double digits for the foreseeable future.

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