Ford’s huge European losses trigger operational review

FORD has launched a review of its European operations after forecasting that Ford of Europe, which includes the UK, will suffer losses exceeding $1 billion this year.


Near-record profits inNorth Americaand continued strong performance from Ford Credit helped the Ford Motor Company deliver its 12th consecutive quarterly pre-tax operating profit – but the performance was undermined by poor results inEurope.


The company reported a second quarter pre-tax operating profit of $1.8bn and net income of $1bn. The company also continued to generate positive automotive operating-related cash flow, and ended the period with a strong liquidity position of $33.9bn, an increase of $1bn during the quarter.


However, Ford of Europe reported a second quarter pre-tax profit loss of $404 million compared with a profit of $176m in the year ago quarter.


First half losses at Ford of Europe now amount to $553m compared with a profit in the first half of last year of $469m. As a result, the company has forecast that its European losses in 2012 will exceed $1bn.


In a statement Ford said the losses reflected unfavourable market factors. The statement said: ‘Volume was unfavourable due to lower industry, share and associated production adjustments to maintain dealer stocks at appropriate levels. Net pricing was lower as the industry responded to excess capacity with higher incentives. Higher contribution costs also contributed to the profit decline.


‘Given the deteriorating external environment inEurope, Ford now expects its full year loss inEuropeto exceed $1bn. The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to these developments.’


The company said it recognised the seriousness of the situation inEurope, and viewed the challenges the industry faced as more structural than cyclical in nature.


The statement continued: ‘While Ford is affected significantly because of its strong presence in the region, the company understands what is needed to achieve profitability and to generate an appropriate return on investments.’


Bob Shanks, Ford executive vice president and chief financial officer, said: ‘We have faced challenging situations in other parts of the business before, and successfully addressed them. We will continue to use our plan as the guide to address challenges and opportunities in our valued European operations.


‘We are reviewing all areas of our business to address the near-term challenges, while ensuring we build a strong foundation for our future. It is premature to discuss details of what our plans may be in response to the situation inEurope.’

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