Ford Brakes

Flagging Demand Gives Fiesta a Siesta

Bernhard Mattes_DPA
Bernhard Mattes, Ford Germany's managing director, is preparing for market stagnation.
  • Why it matters

    Why it matters

    A decrease in demand is forcing the U.S. company to cut production in Europe. The current economic climate in much of the continent means other automakers may follow suit.

  • Facts

    Facts

    • Ford car plants in Germany employ almost 14,000 people.
    • Car sales in Germany fell by 1.9 percent in June.
    • The name Fiesta was chosen by Henry Ford II for its alliteration with Ford, its spirit and as a celebration of Ford’s connection with Spain.
  • Audio

    Audio

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The announcement itself wasn’t particularly worrying, but some experts saw in it a clear potential for further shocks in the car market. Ford is planning to cut production of its Fiesta model at its Cologne plant and gave notification of shorter working hours in October and November, building only 1,550 vehicles instead of the usual 1,850 vehicles.

Lower demand in the second half of the year was to blame, the U.S. automaker said. Only 20 percent of the vehicles produced in Cologne were sold in Germany, while weaker economies, like France, Spain and Italy, were still suffering from consumer restraint.

The Fiesta has stood the test of time, with sales of more than 15 million units since it was launched in 1976. It has managed to keep one step ahead compared to outdated models from other car manufacturers. Just two years ago, the seventh generation of the compact car was introduced, its distinctive, hexagonal grille reflecting the company’s new brand image.

Bernhard Mattes, the managing director of Ford in Germany, does not want to follow the example set by competitors when they face declining orders. They tend to maintain production and push the unsold units onto the market as “one-day registrations” (a new car is registered for one day by a dealer, so he can sell it at a discount afterwards), as fleet cars and to car rental companies. All of which generate far lower margins than new car sales.

“It would be naive to hope for a true recovery.”

Peter Fuss, Partner, EY Consulting

“In contrast to the industry as a whole, we work relatively little with temporary registrations and are not building up stock,” Mr. Mattes told Handelsblatt. While the average share in the industry may sit at around 30 percent on average, at Ford it could be under 20 percent.

Industry experts are seeing general signs of a market cool-down in the most recent sales figures. “In the coming months, we must adjust to stagnations at last year’s historically low level,” said Peter Fuss, a partner at the consulting firm EY.

In 2013, only 12 million vehicles were sold in Europe. Last month was the second worst August in the past 12 years. Mr. Fuss largely attributed the drop to anemic economic recoveries in many large European countries. While economic development in France was stagnating, Italy was falling back into recession. “It would be naive to hope for a true recovery,” he said. Given these conditions, it is conceivable that other manufacturers will have to follow Ford’s example.

Christian Schnell is a correspondent for Handelsblatt in Frankfurt. He covers the car industry. Contact the author: schnell@handelsblatt.com

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