Steve Armstrong rose to the top job at Ford of Europe in June in the reshuffle that followed the ouster of Ford Motor Co. CEO Mark Fields. Armstrong, 53, inherited a profitable division in danger of falling back into the red because of the Brexit vote in the U.K., Ford's biggest European market. The British executive gained experience dealing with market upheaval in his previous role as head of Ford South America. Now he must show that Ford can be consistently profitable in Europe. He spoke with Automotive News Europe Correspondent Nick Gibbs.
Q: How committed is Ford to Europe?
A: We're very committed, as shown by the actions taken by the team over the last few years to strengthen our business. We are committed and we plan to stay.
Last year Ford's profits in Europe fell after a good 2016. What is the company's outlook for Europe in 2018?
We expect 2018 to be more profitable than 2017. That will be underpinned by the first full year of the new Fiesta and the new EcoSport, which we have just localized in Craiova, [Romania]. Later in the year, we have the new Focus coming. By the end of 2018, we will have renewed about 80 percent of our total vehicle range by sales volume [over two years].
You've said 6 percent is your margin target. When will you reach that?
I haven't published a date. For me it's about putting the business onto a trajectory that gets it to 6 percent in the future. After the challenges we had in 2017, we have to demonstrate that 6 percent is an achievable number. It's going to be some time into the future [before the target is reached].
Could a focus on SUVs lead Ford to reduce its car offerings?
We will focus our [budget] allocation on more profitable segments, but it depends where we are in the product cycle. The future of the Fiesta and Focus is secure. But it is clear customers are increasingly moving to crossover-type vehicles.
What is the future for the Mondeo midsize range in Europe?
We still have a great Mondeo business. In future cycles for the product we have the appropriate amount of investment to make sure that it stays competitive. This is also the case for the S-Max and Galaxy [minivans].
Will Ford replace those three models at the end of their life cycles?
We're not at the point that we need to make that decision.
Your predecessor, Ford President of Global Markets Jim Farley, spoke about launching seven-seat SUVs in Europe. Where will they come from?
When Ford globally rolls out seven-seat crossovers then we will decide which ones we want to bring to Europe, either as imports or localized depending on volume or segment.
Ford Motor CEO Jim Hackett said in October he wanted to reduce complexity on model lines, including the Focus, but with the different versions of the Fiesta and Focus you are increasing it.
Not all complexity is created equally. Some complexity adds benefits and choice for the customer. We're taking out complexity where it doesn't add value to our business or to the customer.
What is a good example in the Fiesta?
It's the most efficiently designed Fiesta we've ever done. We've got a better level of subassembly utilization into the various modules that come into the assembly plant [in Cologne, Germany]. It's more efficient for us to manufacture than the old Fiesta.
How much of a financial hit will Brexit cause Ford of Europe this year?
Last year it was a $600 million impact through exchange rates. We haven't broken out a specific number for 2018, but it will continue to be a headwind as exchange rates continue to be weaker, although the pound has recovered a little bit.
Are you confident the U.K. and EU will agree to tariff-free trade?
I'm confident governments understand the implications of not having tariff-free trade. I have to be confident that common sense will prevail.
Ford has cut costs dramatically in the past. What more is there to slash?
There are always costs to cut. Don't let anyone tell you that job is finished because as soon as you turn around, costs creep back in. We talked as a company about taking $10 billion of material costs out. We continue to improve the efficiency of our engineering globally.