Ford CEO warns of European oversupply


Ford (F) CEO Alan Mulally has warned about overproduction in Europe, saying that factory closures over the past year have not lowered capacity enough.

"European carmakers need to cut back further...as excess capacity on the continent remains at dangerous levels," Mulally says.

His warning comes despite sales on the continent starting to recover this year after falling by about 4M cars from 2007-2013.

Relevant tickers: TM, RNSDF, VLKAF, GM, DDAIF, BAMXF, FIATY, HMC, PEUGF, F

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Comments (12)
  • Capt Jack Daniels
    , contributor
    Comments (1466) | Send Message
     
    Isn't the Ford CEO Mark Fields now ?
    26 May 2014, 10:12 AM Reply Like
  • BHT
    , contributor
    Comments (36) | Send Message
     
    not yet.
    26 May 2014, 02:49 PM Reply Like
  • Tdot
    , contributor
    Comments (8155) | Send Message
     
    Alan Mulally remains at the helm of Ford through June. Mark Fields is the Chief Operating Officer, and is taking on more roles and responsibilities through the transition.

     

    http://usat.ly/1nrNsNQ
    26 May 2014, 09:19 PM Reply Like
  • MC Tweed
    , contributor
    Comments (5) | Send Message
     
    The problem is that the bulk of European car factories are in countries that make it very, very difficult to close; just look at GM, they've had to jump through hoops to shut their Russelheim plant, and its been the same with Peugeot and their Aulnay plant. Most of Europe's overproduction is due to governments refusing to let the plants get shut, and they continue to drain money for the car companies which may lead to that company's demise. Governments need to allow the manufacturers to consolidate their production sites to reach the true economies of scale. Yes it will be painful for the workers, but the car makers need to adapt to a changing market, and that may even lead to more work for the workers in the future.
    26 May 2014, 10:17 AM Reply Like
  • R K
    , contributor
    Comments (259) | Send Message
     
    Why don't the auto companies get it. Over supply leads to lower prices which leads to reduced profits or losses. Econ 101. I know, I know, European labor contracts don't allow for flexibility but if they take "the hit" now, long term outcome improves.
    26 May 2014, 10:18 AM Reply Like
  • Tdot
    , contributor
    Comments (8155) | Send Message
     
    Shutting down a plant to decrease capacity almost guarantees loss of market share, and nobody wants to do that.

     

    In addition, it means massive costs to the companies in the "redundancies" (layoffs), with the socialistic welfare societies that overwhelmingly prevail in Europe: workers are paid unemployment benefits almost indefinitely. Unemployment in Europe is already massive, and previously subsidized jobs have dried up and there is little economic growth to improve the situation. Meanwhile, the respective governments for each automaker's locations are doing everything they can to secure the manufacturing bases in their jurisdictions, for political purposes.

     

    In short, no other Automaker in Europe has shown the will to resize and restructure as Ford is doing. It is almost as if they are counting on a miracle or magic, or that someone else is going to go quietly into bankruptcy receivership, and liquidate and evaporate, freeing up market share and production capacity for the others.

     

    It is a dog eat dog situation. Or rather, perhaps like the old saying where one does not have to run faster than the tiger, just faster and longer than the other guy.
    26 May 2014, 09:40 PM Reply Like
  • SpainWatcher
    , contributor
    Comments (226) | Send Message
     
    F is a solid investment
    F is a solid investment
    F is a solid investment
    F is a solid investment
    F is a solid investment
    F is a solid investment
    F is a solid investment
    F is a solid investment

     

    Keep saying it (like every SA article)
    Maybe by 2020 the stock may clear 17
    26 May 2014, 12:18 PM Reply Like
  • Tdot
    , contributor
    Comments (8155) | Send Message
     
    Or maybe by, say, October?

     

    Things should start to turn around for Ford shares in the 4Q, as analysts refine their earnings expectations for 2014 and 2015, and the low "ftm" (forward twelve months) P/E becomes more relevant to investors than the high trailing twelve months P/E.

     

    Right now in mid-year the worry warts see Ford as at the ceiling, based on a 2014 forward P/E of 12.25 ($16.17 / $1.32). Meanwhile, long term investors and bargain hunters are looking at the 2015 forward P/E of 8.46 ($16.17 / $1.91) as a screaming buy, but they are waiting to see if there is going to be another sell down to a bottom in the share price in mid-summer, as some predict.

     

    The net result between these two conflicting attitudes is stagnation.
    27 May 2014, 03:02 PM Reply Like
  • Budavar
    , contributor
    Comments (1401) | Send Message
     
    Here we have a solid one more reason to avoid GM stock.
    Its pumpers have blinders on -
    can't see the many investment alternatives available.

     

    Here I reiterate again my switch reco of last month:
    A switch involves selling one stock + using proceeds to buy another.

     

    >>>Sell GM ( $33.63), buy SDRL ($36.27). <<<
    The original switch allowed for a share for share exchange. No longer possible, but not too late to execute. SDRL has about a PER only 1/3 of of GM's but THRICE its div yield (10%) -

     

    SDRL has its own problems but they pale in comparison with GM's. It is also scandal free.

     

    Good investing to all!
    26 May 2014, 03:37 PM Reply Like
  • zigazaga
    , contributor
    Comments (148) | Send Message
     
    Overproduction ought to lead to lower prices. However:

     

    http://bit.ly/1jnGSYJ

     

    is what happens.
    26 May 2014, 06:44 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3360) | Send Message
     
    zigazaga,

     

    No, what happens is people wind up actually believing ZH articles with pictures of 2009 Chrysler SUVs.

     

    http://bit.ly/1gXpObU
    27 May 2014, 07:30 AM Reply Like
  • zigazaga
    , contributor
    Comments (148) | Send Message
     
    And who's Ronnie Schreiber? It's just one man's conjecture against another's.

     

    The argument stands - overproduction doesn't necessarily lead to lower prices.
    27 May 2014, 01:13 PM Reply Like
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