Ford Is Resigned to Underwhelming Profit Even After Europe Cuts

(Bloomberg) -- For all the cuts Ford Motor Co. is poised to make in Europe, it’s resigned to the region staying a drag on profitability for the foreseeable future.

Ford on Thursday put a giant German van plant on the chopping block, started a strategic review of its Russia joint venture and vowed to consolidate operations in the U.K., adding to plans for a French transmission factory to cease production this spring.

Even with the cutbacks, Ford is targeting just a 6 percent profit margin in Europe for the long term. That’s short of its 8 percent goal on a global basis. The company also stopped short of definitively saying it will close any plants and didn’t give any details about how many jobs it plans to eliminate.

The announcement left the market wanting more. Ford’s shares, which plunged almost 40 percent last year to levels last seen in 2009, traded lower Thursday. Chief Executive Officer Jim Hackett, who’s caught flack for coming up short on earnings targets and canceling an investor day last fall, will face pressure to be more open and act quickly to turn around a company facing risk to its dividend and credit ratings.

“Investor criticism for Ford over the past year has focused on a lack of details on the fitness plan,” Colin Langan, an analyst at UBS AG, wrote in a report to clients. “This release still lacks some specifics.”

Ford has stuck around despite Europe rarely generating positive returns for years. The same could be said for General Motors Co. before CEO Mary Barra decided to abandon business there in 2017 by selling Opel and Vauxhall to France’s PSA Group.

Hackett, 63, and Barra, 57, will have more to share with investors soon. GM hosts an investor event Friday. Ford may announce a broader alliance with Volkswagen AG during next week’s North American International Auto Show, according to people familiar with the matter, and Hackett and other senior executives will speak at several conferences coinciding with the event in Detroit.

--With assistance from Elisabeth Behrmann and Claire Boston.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net

To contact the editor responsible for this story: Craig Trudell at ctrudell1@bloomberg.net

©2019 Bloomberg L.P.