2 Factors Driving Ford Motor Company's Surge in Its Troubled Europe Region

By Markets Fool.com


Infographic source: Ford Motor Company

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Saying that Europe has been a thorn in Ford Motor Company's side over the last three years doesn't do the situation justice. Europe has been a complete buzzkill every single quarter except for a brief moment of levity during last year's second quarter when Ford magically produced a $14 million profit from Europe. Though, the 10,000 foot view still shows that Ford has burned through roughly $4.3 billion from its European operations since the beginning of 2012. Brutal stuff.

With all that said, Ford "only" expects to lose $250 million in Europe this year and the sales results from the first quarter leave investors reasons to be optimistic..

Numbers of interest
Ford sold more than 335,000 vehicles in Europe through the first three months of 2015 which was a 12.5% gain over last year, and ahead of the overall industry's 9% growth. Ford's overall market share in Europe checked in 20 basis points higher than last year to 8.2% and its market share in the commercial vehicle segment was 13.3% -- the first time since 1997 that Ford's commercial market share was No. 1.

Another factor that many overlooked when glancing at the numbers is that Ford's retail and fleet sales channels generated 73% of Ford's passenger car sales in Europe for the first quarter. That's 400 basis points, or 4 percentage points, above the industry average. That doesn't sound like much, but each vehicle sale to retail or fleet customers are more profitable than those to rental companies.

Ford's European sales figures look healthier, but what's driving the growth?

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"Our strategy of investing to create one of the freshest line-ups in the industry is paying off as we are seeing consistent gains in the passenger car market and huge growth in commercial vehicles," said Peter Fleet, vice president, sales, Ford of Europe, in a press release.

Gaining momentum
There are a couple of factors driving Ford's growth in the region; one factor, as Fleet alludes to, is that Ford's newer models are popular overseas. The Mondeo, which is a Fusion under a different nameplate, posted a 34% sales increase compared to last year's first quarter. The Kuga, which is an Escape, checked in with a similar 31% increase over last year's first quarter.

Ford's 2015 Mustang. Image source: Ford Motor Company

That's a good sign as Ford is about to launch the new Vignale Mondeo, which is a more premium Fusion, in a strategy to increase margins without having a more expensive Lincoln lineup in the region. Ford's redesigned 2015 Mustang is also rolling out in Europe for the first time this summer, and if the first quarter's 52% sales increase in the U.S. are any indication, the Stang will help drive incremental sales in Europe sooner rather than later.

Another factor helping Ford's sales in Europe was GM's decision to almost entirely pull out of Russia, as the country's economy continues to struggle. GM has also mostly pulled its Chevrolet brand out of Europe, and that's leaving more mainstream consumers looking to Ford's brand for vehicles.

Ultimately, Ford's European operations will most likely post losses in the first quarter when Ford reports its results on April 28. However, it's clear that Ford's sales are gaining momentum and will gain even more steam on the back of soon-to-be released vehicles. Ford's positioning itself to be very profitable in Europe in the medium to long term, and at the very least investors can rest knowing Europe won't be a thorn in Ford's side for much longer.

The article 2 Factors Driving Ford Motor Company's Surge in Its Troubled Europe Region originally appeared on Fool.com.

Daniel Miller owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.