Ford and Other Automakers See European Capacity Surplus image

Ford CEO Alan Mulally said that the company and other automakers have accepted the fact that they have to reduce production in Europe.

“Europe had a lot of issues in the past and people did a lot of things to subsidize the industry,” Mulally said in an interview in Amsterdam on Thursday. “But you’ve got to size to the real demand so you can profitably grow. People are realizing we all need to deal with that reality.”

Mulally added that car makers in Europe have enough capacity at their plants to manufacture 18 million cars annually. This would be too much in a market that saw auto sales decrease to their lowest level in the past 17 years, with a current annual rate of less than 14 million. Analysts believe that automakers must use their European factories at 80% of capacity to be profitable.

Ford is already using its plants at 63% of capacity and the automaker recently reported it expects to lose over $1 billion in Europe this year. But although the future of auto market in Europe seems quite bleak, Ford still plans to introduce 15 new models here over the next five years, among which three new SUVs and a redesigned Mondeo sedan.