Why Ford's European cars are in a death spiral
More job cuts announced this week on the back of plummeting sales
Here’s a statistic to put the blue into the Blue Oval: its European car registrations plummeted 46 per cent between 2018 and 2023. That’s 464,000 cars.
No car company can lose almost half-a-million sales without taking serious action, so Ford has shed 15,000 staff, a third of its European workforce. With passenger cars losing money and European and UK registrations down 17% this year, Ford yesterday announced another 4000 redundancies by 2027.
But in light commercial vehicles, Ford held its dominant position as Europe’s number one brand from 2018 to 2023; last year it recorded 16 per cent market share. Globally, Ford Pro trucks and vans made $7.2 billion (pre-tax) at a 12.4 per cent margin in 2023 –?a decent return by auto industry standards and five points up on the Ford Blue combustion vehicles division.
Ford’s new strategy: overhauling its car range
It’s a tale of two businesses. So is there any way back for Ford cars? Back in the spring I asked Ford CEO Jim Farley and he replied: “We changed our strategy towards iconic vehicles. We’d always competed in the middle of the passenger car market which didn't work out too well for us with Mondeo, Focus and Fiesta.”
Two of those cars have been axed along with four MPVs, the Ka+ and the Ecosport. That accounts for a big chunk of those lost registrations. The Focus dies next year unless Ford pulls an astounding u-turn. But Renault isn’t culling the Clio or Volkswagen the Golf –?those hatchback markets are still worth 3 million units a year in Europe alone.
Where things went wrong for Ford
Ford has been losing share to the German premiums and the Koreans because of repeated bad product planning calls. Investing in driving dynamics not desirable cockpits. Launching a competitive small SUV (the Puma) years after rivals, and hoping the imported Edge or big Explorer SUVs would cut it against Euro-focused seven-seaters such as Skoda’s Kodiaq or the Peugeot 5008.
The company was similarly late with plug-in hybrids, though the electrified Kuga SUV has become the continent’s top-seller three years running. And now the uncertain path to full electrification is unleashing industry-wide chaos.
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Ford initially planned to be all-electric by 2030 but with consumer adoption tapering off the industry’s plans are being redrawn over and over again. But Ford’s bungled its execution, ending up with THREE electric SUVs that overlap so tightly there’s only 25cm between the smallest and biggest and ￡4745 in UK list price.
Converting the former Fiesta factory in Cologne to build the Explorer and Capri EVs, based on Volkswagen’s MEB chassis, cost $2 billion. You can see the logic: Ford crippled by its lack of scale and dwindling engineering capability in Europe, partnered with VW. Its designers have given the Explorer a clean, robust look and its ride and handling experts have sharpened the ID.4’s dynamics. But neither electric Ford lives up to Farley’s “iconic” billing –?“ironic” more like, trying to pass off a rebodied VW coupe-SUV as the new Capri.
Car enthusiasts scorned this rebirth for its lack of authenticity, a criticism that applies to the Mustang Mach-E too. In Ford’s defence there’s no market for electrified two-door coupes but mishandling beloved nameplates will devalue the heritage that Ford’s CEO truly savours. And, as electric momentum slows, consumers aren’t lapping up Ford’s new EVs and production is being scaled back as a result.
Ford asks policymakers for help
So what now? Ford is calling for EU policy makers to reintroduce subsidies and invest in infrastructure to boost the EV transition, ease the threat of fines for missing CO2-reduction targets and help boost manufacturers' cost competitiveness. All against a backdrop of mounting Chinese imports: “How do you compete cost wise with the Chinese who have massive overcapacity?” Farley asked.
Electric investments and the product centre of gravity have swung emphatically to the USA and when Farley outlines the vehicles Ford’s naturally good at –?“fast Fords and Broncos and authentic off-road and vehicles like Explorer” –?the list sounds painfully inappropriate for this market. Meanwhile the dealer base is diminishing.
Ford vows it remains committed to Europe. That’s certainly true for vans. But the passenger car business looks in a death spiral. In today’s brutal global market, does Ford have the management time, resources and appetite to turn Europe around? It looks like mission impossible.
With thanks to JATO Dynamics’s Felipe Munoz for the data, and Alexander Tapley for the Jim Farley portrait
Very informative
Work-winning Bid Manager & Capture Expert.
3 个月I take it Jim's Vignale sub-brand didn't work out? ?? Anyhow a good read as always Phil McNamara
Design Communications Manager at Hyundai Motor Group
3 个月Excellent article Phil, thank you. My favourite line is “…mishandling beloved nameplates will devalue the heritage that Ford’s CEO truly savours.” Spot on there. Mustangs and Capris cannot simply morph into SUVs overnight. Abandoning car production in favor of trucks with bigger margins may do well to steer the ship in North America but, as you say, Ford’s got its work cut out for it in the European market.
It's all very well for them to halve sales in five years by concentrating on the profitable segments. But what about the dealers? Starved of profitable used-car and aftersales business, they'll bugger off to the Chinese newcomers. So the death spiral will go on. This is a tragedy that had been years – decades – unfolding. Every other European carmaker had several brands so could amortise platform and plant investments for small cars. Ford (Ka+ excepted) didn't. I also suspect there's always been a transfer pricing issue. Detroit wants to look like it's profitable, so what's exported from Europe to the Americas is booked at discounted price.
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3 个月Interesting, but you fail to mention that it’s retracting to the US, just less honestly and abruptly than GM did. Once Fords are VWs then it’s all over, really. Ford is probably calculating that a tariff-protected market back home is the best - the only - way to survive the Chinese onslaught. All rather sad.