Ford lifts European production target

Ford Motor Co increased its first-quarter production target in Europe after sales of the Fiesta and Ka models surpassed forecasts, the carmaker’s chief executive officer for the region said in an interview.

Ford will produce 460,300 cars, or 4.6 per cent more than originally planned, John Fleming, CEO of Ford of Europe, said before the Geneva auto show. With the increase, the company will make about 117,000 vehicles more than a year earlier, when it idled factories to reduce inventories.

“January and February, in truth, were higher than we expected,” Fleming said by telephone from Ford’s European headquarters in Cologne, Germany.

Even after the strong start to 2010, Dearborn, Michigan- based Ford is sticking with its forecast for a drop in the market for European car sales of as much as 15 percent this year partly because of economic instability related to Greece’s debt crisis. Discounts are also on the rise after governments halted scrapping incentives.

“There’s much more pressure in the market than there was even last year,” said Fleming, who also heads manufacturing and labor affairs globally at Ford. “Nobody really wants to lose a significant amount of volume, and there’s absolutely been no capacity shaken out of the market.”

Passenger-car registrations rose 13 per cent in January in the European Union, led by increases in France, Italy and the UK, according to data compiled by Brussels-based European Automobile Manufacturers’ Association.

While the Ford brand boosted deliveries by 5.6 per cent, its market share dropped to 8.7 per cent last month from 9.3 per cent a year earlier, while Volkswagen AG and Renault SA’s namesake brands as well as PSA Peugeot Citroen added share.

Ford intends to stay out of the pricing battle as much as possible, Fleming said. In Germany, the region’s top car market, Ford offered discounts of 9.6 percent in January, compared with the market’s average of 11.2 per cent, according to data published by automotive trade publication Autohaus PulsSchlag.

“Our No. 1 objective is profitability, so if to maintain good profitability it means we end up losing some share then that’s the right tradeoff,” he said, adding that a price war would prove “extremely expensive” in the current market.

Ford’s European operations posted a pretax profit equal to 3.5 per cent of sales in the fourth quarter. The company expects sales in the region to drop from 15.8 million in 2009 to between 13.5 million and 14.5 million vehicles this year.

Ford aims to counter the contracting market with new vehicles, including 11 models due out this year. At the Geneva International Motor Show it will introduce the new C-Max and Grand C-Max minivans, which will compete with the revamped Opel Meriva from General Motors Co., also debuting at the Swiss event. Other models appearing in Europe in 2010 include updated versions of the S-Max and Galaxy vans and the Focus compact.

Still, the economy poses a risk. Greece’s fiscal crisis has stoked concerns that it may need a bailout, putting pressure on the euro.

“We have to watch what the European countries are doing to stick together through this particular issue and make the EU work as I think everyone wanted and envisaged it,” Fleming said. “Hopefully at the end, there’s a mechanism put in place which helps them to recover.”

The impact on sales in Greece itself is already being felt, according to the executive.

“It’s gone quite soft,” he said. “The worst thing is the instability when the market’s very fragile. The sooner we get back to a stable position where everyone understands what’s happening, the better it will be for everybody.”

Negotiations to sell Swedish unit Volvo Cars to China’s Zhejiang Geely Holding Group Co remain on track for signing in the first quarter and completion in the second, Fleming said.

Sorting out financing and government approval is “continuing to move forward,” he said. “We have come to the point where there’s a really good understanding of what’s wanted and what we’re trying to do.”