Ford Expects to Increase Sales By 50 Percent By 2015
By Chris Haak
Yesterday in New York, Ford Motor Company executives told reporters and investors that the company expected to increase its global sales by 50 percent by 2015 to around 8 million units. In 2010, Ford sold about 5.3 million units globally. Ford will need to average 8.58 percent global sales growth during each of the next five years in order to hit that number.
Hitting their number would not only be a huge accomplishment for Ford, but would also put the company in the top tier of global automakers. Toyota, the world’s largest automaker by sales in 2010, sold 8.42 million vehicles, with GM’s global sales just 30,000 units behind. Volkswagen rounded out the top three with 7.14 million units. Of course, Ford’s 2015 sales ranking depends not only on what Ford can do, but also on what its competitors do. There are only so many sales to be found worldwide, and everyone wants a bigger slice of a pie.
So where does Ford plan to find another 2.7 million buyers? Emerging markets, of course, and China specifically. Despite Ford’s success in Europe and North America, the company has only a small share in China. Currently, Ford sells just five models in the Middle Kingdom, good for a 2.4 percent share of the Chinese market. GM holds 10 percent of the Chinese new-vehicle market, and can thank its dominant position in China for its ability to bounce back so quickly from bankruptcy to be nipping at Toyota’s heels for the “world’s largest automaker” title again in 2010, and all but certain to reclaim the title for 2011.
To increase its sales in China, Ford needs more diversity in its lineup. The current lineup will be expanded threefold, to 15 vehicles, by 2015. It’s also planning to add hundreds of new dealers and build additional assembly plants.
Ford’s moves toward expansion in Asia come as its longtime partner Mazda retrenches a bit in North America. As the two companies are in the process of unwinding various partnerships, Mazda announced this week that it would withdraw from the AutoAlliance factory in Flat Rock, Michigan that builds the current Mazda6 and Ford Mustang after the current 6’s life cycle concludes, with a Japan-built car replacing the US-built one for the next generation.
More than just sales plans, Ford has some ambitious financial targets in mind over the next few years as well as the company is finally out of the restructuring business and back in the growth business. According to Ford CFO Lewis Booth:
- Automotive debt will be reduced to about $10 billion by 2015, which is a significant reduction from the $33.6 billion figure a the end of 2009, and even down significantly from $16.6 billion in automotive debt on March 31, 2011.
- The company expects to return to investment grade in the near future after a bit more debt retirement
- After receiving an investment grade rating from the ratings agencies, Ford plans to resume paying dividends “at an appropriate level of after-tax earnings.”
- Ford expects North America operating margin around 2015 to be in the 8 percent to 10 percent range, with the global automotive operating margins to increasing from 2010’s 6.1 percent to 8 to 9 percent in 2015 from 6.1 percent in 2010.
Ford’s Asia expansion will cost some significant scratch. But Ford doesn’t expect to need new debt; instead, it will finance the expansion without new debt and while improving profit margins, according to CFO Booth.