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September 30, 2014 01:00 AM

Ford sets high 2020 sales goal while Europe remains a drag

Staff and wire reports
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    DETROIT -- Ford targets boosting its global vehicle sales by 52 percent to 9.4 million annually by 2020 as the automaker looks to fast-growing Asian markets to offset the poor-performing regions of Europe and South America.

    Ford aims to be among the world's top five automakers by the end of the decade, up from sixth last year. "We are a growth company in a growth industry,” CEO Mark Fields, who replaced retired CEO Alan Mulally on July 1, said on Monday in his first presentation to Wall Street investors and analysts.

    Fields said the automaker plans to maintain the same One Ford plan developed by Mulally, while accelerating its execution.

    Europe profit at risk

    To get there, though, it might take Ford longer than expected to turn around its European business. The automaker says that while it still aims to make a profit in Europe next year, it expects a 2015 pretax loss of about $250 million in the region.

    As recently as July 24 Ford said it would return to profit in Europe by next year.

    For 2014, Ford forecasts a loss in Europe of $1.2 billion.

    A big reason for the trouble in Europe is turmoil in Ukraine that has hit the key Russian market. Chief Financial Officer Bob Shanks said Ford now expects to lose about $300 million this year in Russia, more than previously expected.

    Shanks said the company's money-losing operations are targeted to achieve profit margins by 2020 of 7 percent to 9 percent in South America and 3 percent to 5 percent in Europe. Ford is forecasting a companywide pretax operating profit margin of about 8 percent by 2020.

    Shanks said the company's profits this year will be at least $1.5 billion less than previously estimated. He said warranty and recall costs are coming in about $1 billion more than anticipated and that Ford will lose about $900 million in South America rather than $100 million as it originally thought as inflation and other currency problems hurt operations there.

    The result will be a pretax profit of around $6 billion, down from $7 billion to $8 billion previously forecast.

    European results suffered as low interest rates increased pension costs, while political upheaval in Ukraine depressed sales and fueled currency swings in Russia.

    "Ford has worked hard to turn things around in Europe, but unfortunately, the market hasn’t rebounded in the same way as the U.S., hence the larger losses," said Matt DeLorenzo, managing editor at Kelley Blue Book’s KBB.com. "Similar economic turmoil in South America has also contributed to Ford’s poor performance there. Unless there is a significant economic growth in those areas, look for Ford to continue to lag behind their projections of narrowing those losses."

    China, Lincoln growth

    Ford said it expects Asia-Pacific industry sales of between 51 million and 53 million vehicles by 2020, rising significantly from an expected 40 million to 42 million in 2015. China alone will account for a projected sales of 29 million to 31 million vehicles in 2020, executives said.

    Ford expects a pre-tax operating profit this year in Asia-Pacific of $700 million with nearly all of that coming from China, with Asia-Pacific margins rising to between 12 percent and 14 percent by 2020.

    Lincoln, Ford’s lagging luxury brand, is a key part of Fields’s growth plan. Ford plans to triple Lincoln’s global sales, to 300,000, by 2020 in part by adding two more vehicles to its lineup and introducing the brand in China. Ford said it will have eight Lincoln dealers in China by year’s end. Seventeen more dealerships are scheduled to open next year.

    U.S. projections

    Regional pressures outshined bullish projections for North America, where Ford's vehicle sales will grow from 2.9 million vehicles last year to 3.5 million in 2020, a 21 percent increase, said Joe Hinrichs, Ford’s president of the Americas. Hinrichs said he expects the U.S. new-vehicle market to be between 17 million and 18 million by 2020. Profit margins will grow slightly in that period, he said, from about 8 percent this year to between 8 and 10 percent by 2020.

    Fewer platforms

    Ford aims to build about 99 percent of its vehicles on just nine global platforms by 2016, according to product development chief Raj Nair. The automaker now builds about 90 percent of its vehicles on 15 global platforms, Nair said. Eventually, it plans to reduce the number of platforms to eight.

    Nick Bunkley, Reuters and Bloomberg contributed to this report

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