Ford Europe, launching Kuga/Escape, impresses investors despite big losses

VALENCIA, Spain – Ford of Europe could have picked a better time to launch its new Kuga compact SUV here this week –  losses in 2012 of $1.75 billion, another $2 billion in the red likely this year according to an announcement Tuesday – but investment bank Morgan Stanley still  believes turnaround plans could produce break-even by 2015.

Ford Europe is suffering like all the non-German mass car manufacturers as the economy here falters, consumers fear the worst for the euro single currency zone and their jobs, and car sales slump. Ford’s results were worse than expected. Consensus called for a $1.5 billion loss for 2012 and the same again in 2013.

Unlike GM Europe’s Opel-Vauxhall subsidiary, Peugeot-Citroen and Renault of France, and Italy’s Fiat, Ford Europe has been much more aggressive in taking steps to cut production, shutting two plants in Britain and one in Belgium. The others have talked about cutbacks but have yet to take much action.

After the results announcement, Morgan Stanley talked of a bottoming Europe, where Ford was in a good position to benefit from the crisis. In a report published before the results, Morgan Stanley reckoned break-even was possible by late 2014/2015, helped by Ford’s  decision to already cut 18 per cent of European capacity.

Reuters BreakingViews agrees.

“Europe is much more painful (than the U.S.). The good news is that Ford’s restructuring plan is well under way. Chief Executive Alan Mulally and his team reckon that this year’s red ink will be the worst of it, and their track record turning around the American business should provide comfort,” according to Reuter’s Antony Currie.

Morgan Stanley said Ford Europe is suffering because too many manufacturers are chasing too few customers, but it will stay the course, and its decision to pursue global products will pay off in the end.

“One thing is clear to us: Ford does not have an exit strategy in Europe, nor should it. Ford simply has to make Europe work. Thankfully, they can. Two thirds of Ford’s European product offering is made on global platforms where over 70 per cent of content is shared across products and in many cases – like the global Focus, Escape/Kuga, Fusion/Mondeo and Fiesta – far more,” Morgan Stanley said.

“In this regard Ford resembles Kia or VW more than a typical (manufacturer). Ford may only be the world’s 5^th or 6^th largest manufacturer, but its scale of platform production hangs with the big boys. Rivals may take to the end of the decade to replicate the true scale Ford enjoys today,” the report said.

Meanwhile in this eastern Spanish city, Ford introduced the new Kuga to the European media. The Kuga is almost identical to the new Ford Escape, but with typically smaller European four-cylinder engines. Buyers can choose between a 1.6 liter 148 hp gasoline motor, or two liter diesels of 138 or 161 hp. Ford was very proud of its hands-free tailgate, which should open if you approach with your hands full off groceries and aim a kick under the rear-end. This didn’t always function, so more work is needed there. But the all-round quality, quietness and driveability of the Kuga will impress customers.

Ford Kuga