Ford Motor Co.
) recorded full year net income of $6.6 billion in 2010, its
highest net income in more than 10 years, with international
operations (outside North America) contributing 46% of its total
automotive sales during the year. We estimate that
Ford's international operations
represent roughly 35% of its stock value, similar to the
contribution from the country's North American
and trucks together). Ford competes with other global automakers
like BMW (GR:BMW), GM (
), Daimler (ETR:DAI), Audi (
), Honda (
), and Toyota (
We have a price estimate of $20.59 for Ford stock, roughly 35%
ahead of market price.
Here we take a look at Ford's outlook in key international
markets. This analysis covers the company's operations across 19
countries - Britain, Germany, France, Italy, Spain, Austria,
Belgium, Ireland, Netherlands, Portugal, Switzerland, Finland,
Sweden, Denmark, Norway, Czech Republic, Greece, Hungary, and
European Automotive Industry
Outside of the United States, Europe is Ford's largest market
for cars and trucks. It added $29.5 billion (25%) to the company's
total automotive sales in 2010. The automotive industry in Europe
is intensely competitive - Ford's principal competitors in Europe
include General Motors (
), Volkswagen A.G. Group (ETR:VOW), PSA Group (UG), Renault Group
(RNO), and Fiat SpA (
). For the past 10 years, the top six manufacturers have
collectively held between 69% and 75% of the total market.
In 2010, total vehicle sales in these nineteen countries stood
at 15 million, a decrease of around 3.5% from 16 million units sold
in 2009. This decrease was largely due to the termination of
government scrappage programs during 2010, which were in place
during 2009 to incentivize new vehicle purchases during the
economic crisis that began in late 2008.
Ford's Share of European Markets
The Ford brand's car and truck market share dropped by nearly 1%
in 2010, leaving this number just north of 8%. Within the nineteen
European countries listed above, Ford sells the highest number of
cars and trucks in Britain and Germany. Consequently, Ford's sales
are very sensitive to economic changes in these two countries.
In Britain, industry sales increased to 2.3 million units in
2010 (3.2% growth from 2009). 2009 sales in Britain were
considerably lower due to the economic crisis that began in late
2008. In Germany, government stimulus programs ended in the
last quarter of 2009. This led to industry sales in Germany
declining by 21% in 2010 to 3.2 million units. Ford−brand
combined car and truck market share in 2010 was 15% in Britain (2%
below 2009 levels), and about 7% in Germany (1% below 2009
European Austerity Measures to Hamper Auto Sales
Following the sovereign debt crisis in Greece, most European
countries decided to adhere to strict austerity measures to reduce
their sovereign debt levels. This will likely put pressure on
European vehicle sales in the short-term.
Competition from Japanese and Korean Auto
The competitive environment in Europe is expected to intensify
further as Japanese and Korean manufacturers increase their
production capacity in Europe, and as manufacturers of premium
brands (e.g., BMW, Mercedes−Benz, and Audi) continue to broaden
their product offerings. This will put downward pressure on Ford's
market share in these regions.
Ford Ready to Fight with New Vehicle Launches
Ford plans a strong product line-up to keep its vehicle
portfolio fresh. Higher operational costs in 2010 should translate
into new feature advancements for Ford's 2011 line of vehicles.
Ford plans to launch several new models in Europe, including
zero emission electric vehicles like the new Focus Electric, Ranger
Wildtrak and Vertrek SUV concept. Ford will also launch the
next-generation of hybrids, the Kuga and the C-MAX Energi, and
these should help Ford drive sales and maintain one of the newest
product line ups in the industry. This should curtail Ford's market
share decline in these regions.
Potential Downside to our $20.59 Price Estimate
A difficult economic environment in Europe could put added
pressure on Ford's auto sales in Europe over the near-term. This,
coupled with increased competition, could spur downside to our base
case forecasts and $20.59 price estimate for Ford stock.
Drag the trend line in the interactive chart above to examine
how downside to our base case forecast for Ford's international
market share could affect the company's stock value.
See our complete analysis for Ford stock here