Ford's CEO Alan Mulally on Investing in Europe Amid Global Uncertainty

Strategic Insights -

Ford Motor Company is investing $200 million to build a new engine in Cologne, Germany, which will be available in European models of the Ford Focus and other vehicles worldwide. CEO Alan Mulally joins Bloomberg TV to discuss the company's decision to invest in Europe, despite the region's economic instability and uncertainty.

As Mulally explains, Ford's history in Cologne and the plant's quality, productivity, and competitiveness played a significant role in the decision. The new engine is a high-eco-boost engine, the most fuel-efficient in its class worldwide, and will serve not only the European market but also vehicles in other parts of the world. Mulally asserts that the company is confident in the European leaders' ability to address economic challenges and maintain the economic expansion.

When asked about the potential risks associated with investing in Europe, particularly in light of the Italian bond yields and potential Eurozone crisis, Mulally emphasizes the importance of decisive leadership and the development of solutions to address these challenges.

Mulally also addresses Ford's recent financial performance, specifically the surprise loss in Europe in the fourth quarter of last year and the subsequent effect on the company's stock price. However, he notes that the company has been profitable for the first nine months in Europe and has given guidance for the full year in Europe, indicating that they will deliver on their forecast.

In the context of global competition, particularly in light of the recent disasters in Japan and floods in Thailand, Mulally highlights Ford's geographical diversification and its new One Ford Plan, which serves customers worldwide with a full family of best-in-class vehicles. He also discusses the impact of the floods in Thailand on Ford's operations and the company's expectation to start production again in the middle of the month, with a potential loss of about 30,000 units.

Key Takeaways:

  • Ford is investing $200 million in a new engine in Cologne, Germany, a high-eco-boost engine and the most fuel-efficient in its class worldwide.
  • The engine will serve European models of the Ford Focus and other vehicles worldwide.
  • CEO Alan Mulally emphasizes the importance of Ford's history in Cologne, quality, productivity, and competitiveness in the decision-making process.
  • Mulally is confident in the European leaders' ability to address economic challenges and maintain the economic expansion.
  • Ford has been profitable for the first nine months in Europe and has given guidance for the full year in Europe, indicating a potential for delivery on their forecast.
  • Ford's geographical diversification and One Ford Plan make it well-positioned to handle global competition.
  • The floods in Thailand will cause a loss of about 30,000 units, but Ford is planning to start production again in the middle of the month.

Statistics:

  • $200 million: Ford's investment in the new engine in Cologne, Germany.
  • 15 million units: Industry levels in Europe.
  • 30,000 units: Potential loss due to floods in Thailand.
  • 17,000 units: Initial loss due to floods in Thailand.
  • 1,000,000: Number of new engines expected to be built in Europe in the years to come.

Sources:

  • Bloomberg TV Transcript of the Interview with Alan Mulally, CEO of Ford Motor Company, November 9, 2011.