Ford outlines 2020 vision: 9.4m unit sales, higher operating margin of 8%, bigger global footprint

Ford Motor Company has outlined its 2020 vision, which includes plans to substantially increase its global vehicle sales and automotive operating margin, and achieve more balanced geographic profitability.

By 2020, Ford projects annual global sales to increase 45 to 55 percent to approximately 9.4 million units. Its automotive operating margin is projected to improve to about 8 percent during the same period, with a long-term target of 8 percent to 9 percent.

“Our long-term plan underscores the commitment we have to our One Ford plan, while accelerating our pace of progress, delivering product excellence and driving innovation in all areas of our business,” said Mark Fields, Ford’s president and CEO. “We remain completely focused on offering customers the freshest line-up of world-class vehicles to meet their needs.”

Ford anticipates that, by 2020, all five automotive Ford anticipates that, by 2020, all five automotive business units and Ford Credit will contribute to the company’s profitability. Today, the company’s profits are more than explained by North America and Ford Credit, with growing profits in Asia Pacific, while it continues transforming its Europe, South America and Middle East & Africa operations.

As it continues expanding in new regions, Ford says it is aggressively moving to match production to growing customer demand and achieve benefits of global scale. In addition, by 2020, the company projects its breakeven volume will be two-thirds of its wholesale volume. By 2020, Ford Credit expects managed receivables to increase by about 50 percent.

Meeting customer demand

Ford’s 2020 vision is driven by the company’s confidence in its global product plans. Those plans focus on delivering a full family of vehicles that meet and exceed customer expectations in Ford’s four brand pillars — quality, green, safe and smart — across the world.

Ford aims to bring new features to market and will seize opportunities to differentiate itself from competitors. Those vehicles will target a diverse set of customers, from value buyers in developing regions to luxury customers in the US and China and truck and utility customers globally.

Ford, with the 2015 F-150, is the first automaker to use high-strength, military-grade aluminium alloys in the body of a mass-market vehicle and plans to expand its aluminium use to include the next-generation Super Duty. The use of aluminum allows Ford to maintain its truck leadership, improve capability and durability across its entire lineup, and deliver better fuel economy.

On the innovation front, the company plans to continue to grow its presence in Silicon Valley by expanding its Palo Alto Research and Innovation Center with a new focus and expanded talent from different industries and backgrounds. The focus will remain on R&D of in-car connectivity and automated driving technologies, key components of Ford’s Blueprint for Mobility.

A shift in customer and regional trends means small vehicles will play a larger role in Ford’s product portfolio. Global models like the Fiesta, Focus and EcoSport, and regional nameplates such as the Figo, Ka and Escort, will comprise a greater percentage of Ford’s sales.

Fuel-efficient and versatile sport-utility vehicles and crossovers, like the Edge and Explorer, will also make up a larger portion of Ford’s overall sales total, especially as those models become available in new regions. All segments will grow volume compared to today’s levels.

99 percent of global sales on 9 platforms by 2016

The company is on plan to have 99 percent of its global sales volume built on nine platforms by 2016 and is furthering its strategy by consolidating its long-term product plan to eight platforms. The company will generate positive automotive operating-related cash flow throughout its planning period, and capital spending is expected to increase to about $9 billion (Rs 55,269 crore) annually, up from $6.6 (Rs 40,530 crore) billion in 2013.

With this, Ford says it plans to refresh its global product portfolio one-and-a-half times through the end of the decade — an expected industry-leading refresh rate.

Lincoln sales seen tripling as brand expands to China

The reinvention of Lincoln as a world-class luxury brand continues in North America and China and will lead to long-term sales growth and an increase in operating margin. This year in the U.S., Lincoln is attracting new customers with its MKZ and MKC. Both vehicles’ segment shares are growing, performing above the overall Lincoln brand market share level, and the vehicles are helping to lead the revitalization of the brand.

By 2020, Lincoln targets a tripling of vehicle sales to approximately 300,000 because of the brand’s debut in China and increased market coverage. Lincoln anticipates a long-term operating margin in line with leading luxury brands.

2014 outlook: On line to launch a record 23 vehicles

This year will continue to serve as a critical building block in the One Ford plan. The company says it is on plan to launch a record 23 vehicles in preparation for a more profitable 2015. As a result of higher warranty costs, including recalls, in North America — mainly for prior year models — and lower industry volume and weakening conditions in South America and Russia, Ford now expects its 2014 pre-tax profits to be approximately $6 billion (Rs 36,846 crore), excluding special items.

Ford expects its North American operating margin at the lower end of its 8 percent to 9 percent guidance range, and better results in Europe, Asia Pacific and Ford Credit, compared to 2013.

2015 outlook: 16 global vehicle launches

In 2015, Ford expects to realise the benefits of its global product investment and growth strategies, and will continue its strong product push with 16 global vehicle launches.

The company expects its pre-tax profit, excluding special items, to be significantly higher — in the $8.5 billion to $9.5 billion range (Rs 52,198 crore to Rs 58,339 crore) — with all five automotive regions improving on 2014 results.

Europe, which Ford previously said would return to profitability in 2015, is now expected to lose about $250 million because of continued volatility in Russia and higher pension expenses as a result of lower interest rates. The company continues to believe it has the right transformation plan for Europe, focused on products, brand and costs.

Europe, which Ford previously said would return to profitability in 2015, is now expected to lose about $250 million because of continued volatility in Russia and higher pension expenses as a result of lower interest rates. The company continues to believe it has the right transformation plan for Europe, focused on products, brand and costs.

“In 2015, we’ll take the next step in our long-term plan that calls for all parts of the Ford business to contribute to overall profitability,” said Bob Shanks, Ford executive vice-president and chief financial officer. “Although we face a variety of challenges as we approach 2015, we are well positioned for long-term growth in all areas of the business.”

Revenue and operating margin are projected to be higher than 2014, and wholesale volume is expected to grow in all regions. Ford Credit pre-tax profits are expected to be about equal to or higher than 2014.

Ford expects industry sales volumes to grow in 2015. The company projects U.S. industry sales between 16.8 million and 17.5 million. In Europe, sales are expected between 14.8 million and 15.3 million. In China, they are expected to increase to between 24 million and 26 million.