Editor's note: A previous version of this story misstated when Ford of Europe was last profitable in Europe.
Ford of Europe increased vehicle sales 11 percent to 1.3 million vehicles in its core markets and finished 2015 with its first operating profit in three years. Jim Farley, who started his second year as Ford of Europe president on Jan. 1, wants the division to be a consistent profit contributor to its U.S. parent. To do that Farley will be even more selective on the segments where Ford competes. He also is determined to make Ford a mobility leader in Europe. Farley shared his plans with Automotive News Europe Editor Luca Ciferri, Managing Editor Douglas A. Bolduc and Correspondent Christiaan Hetzner.
Ford made money in Europe last year for the first time since 2011. Are you at the start of a long winning streak?
I don't think any executive gets up in the morning and says 'I love to break even.' We are here to make a sustainable and vibrant business.
What kind of profit margin is possible in Europe given that most automakers have not addressed the region’s overcapacity issue?
That's the No. 1 question I faced when I got my job. I think the answer is multifaceted. The first thing is: Be careful where you compete.
By leaving less-profitable segments Ford would achieve above-average industry profitability in Europe?
Where you compete is the billion-dollar question for brands like Ford in Europe. We have had great success with our SUV and [commercial vehicle] businesses. We have great success with our more emotional products like our ST performance line. That has encouraged us to challenge ourselves. Where you compete and where you don’t compete is the most important thing between a 2 percent and a 5 to 7 percent operating margin.
Does that mean your operating margin goal is 5 percent to 7 percent?
I’m just saying if I look at the existing manufacturers, you see Peugeot is at 5 percent while many other volume carmakers are at 2 percent. The range is 2 percent to 7 percent.
Can you reveal your target?
As a company we've said globally that we want a margin of 8 percent. To be a good investment for the company, we will have to be in that range.
How important is it to Ford to be a mobility leader?
Leadership in mobility in Europe is a signature piece for our strategy going forward. We’ve studied the market very carefully, and we really think there’s a lot of opportunity.
What do you foresee in 2016?
What we see in Europe is continued modest growth. We're really seeing good solid growth in southern Europe for the first time in a long time. We think the overall Euro 20 market [western and eastern Europe] will finish at about 16 million, and we're really poised to have another great year.
What were some of the highlights for Ford of Europe last year?
It was a breakthrough year for us. We reached No. 1 in commercial vehicles in Europe with a CV share of 12.6 percent [up 1.2 percentage points versus 2014]. Our SUVs were up 31 percent and in 2016 are expected to grow by about 30 percent to break the 200,000 barrier for the first time
