"Turning to Europe on slide 22. Let me state plainly that we are disappointed with our performance. The loss of $73 million compares to a profit of $122 million last year. The decline in EBIT was driven by higher costs, primarily regulatory related, and unfavorable exchange, mainly sterling. While market factors were slightly positive, we had expected a much stronger boost from the top line both in volume and net pricing."
"Turning to slide 23. Europe similar to North America actually has a strong core product portfolio that last year represented more than 200% of the region's EBIT. This quarter consists of commercial vehicles including Ranger, our Kuga small utility and select imports. On the other hand, the low performing part of our portfolio represents a majority of our volume, revenue and capital deployed in the region, consisting principally of cars and multi-activity vehicles such as C-MAX."
"Clearly our European business requires a major redesign and refocus particularly given the ongoing effects of Brexit on our most important and profitable market. That work is already underway, focused on addressing the low performing elements and expanding and strengthening the healthy pillars of our portfolio."
"It's important to recognize that partnerships, which are a part of our fitness toolkit, are already an integral part of our European operations and going forward we expect them to play an even greater role."
"We know that when we play to our strengths for customers, we drive strong profits and returns. In contrast, the erosion we've seen in both Europe and China is unacceptable, highlighting why we are changing our portfolio in these regions to profitably grow."
"Turning to Europe and our deteriorating results. Despite being only 30% of our revenue, our LCV business continues to be the bright spot, with 13% EBIT margins. This reflects our strong core portfolio with Ford as the number one best selling LCV brand, led by Transit and our vans and Ranger which is now the best selling pickup in the region. But despite this strength, one of our underlying issues is that we are behind on the shift to utilities and now our portfolio under index on this highly profitable and growing segment."
"The biggest issue we face is the UK. We're the number one brand in the market. Back in 2016 we made $1.2 billion in Europe and most of it was in the UK. Brexit and the continued weak sterling has been a fundamental headwind for our European business. This explains the majority of our deterioration along with the age and mix of our utilities and cost. Taking all of these factors into account, we now expect to deliver a loss this year in Europe. To deliver on our long-term target of 6% EBIT margin, clearly we have to redesign Europe, centering the operations on our profitable LCV business. We are aggressively attacking costs and driving improved capital efficiencies across the business. Importantly, capital allocation plans now align with utility and the LCV business opportunity."
