This was overdue, especially investors were asking for clarity. They were asking what exactly is the plan it Europe. In the fall of last year Ford actually canceled an investor day. There was a bit of revolt in Wallstreet where some analysts were actually openly talking about how long James Hackett, the CEO was going to be around and whether he would be there to delivery the message about how they are going to restructure.
This is a company that has abandoned its long term target of getting to an 8% profit margin. In making this announcement about what they are going to do in Europe, they are saying that they will be able to get to 6% margin. So they are going to be short of their target on worldwide basis. But interestingly last year they walked away from when exactly they going to get to that 8% margin.
Still a lot of open questions. If they are not going to be achieve their targets on global basis. Why stay? General Motors has sold their European business to PSA. European industry right now is at healthy level of sales and yet its not really a profitable market for much of the industry.
Ford actually said that it will stay in Europe if it can transform its business. That’s not saying we are definitely staying, that’s saying; we will stay for now. That’s a very lukewarm commitment on part of the Europe’s chief Steven Armstrong. They do have to be careful about overstating about what they are going to do there because they also made some announcements about their plants. A couple of weeks ago they talked about walking away from a plant in France. They are also talking about getting out of some plants in UK and Germany as well. So there is going to be a lot of push back from labor and governments.
On the other hand Volkswagen is going to meet tomorrow at their board meeting. We do expect that they are likely going to have something to say about electric vehicles and autonomous vehicles, that could include an investment in Argo AI which is the self driving unit that Ford has backed and had more than a billion dollars in investment.