Ford’s Woes Mirror World Concerns Over Europe
Ford posted profits of $1 billion in its most recent quarter, but that’s down from $2.7 billion a year ago. That’s due to the slowdown in Europe, which is mired in bailout talks for countries from Spain to Greece.
Ford said it earned $1 billion in the quarter compared to $2.4 billion in the same period last year. While its core North American business continued to perform well, it reported a loss of $404 million in Europe.
The automaker now expects to lose more than $1 billion in Europe this year, as increasingly worse sales there drag down what is otherwise a turnaround.
‘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 those developments,’ the company said in a statement.
European car sales have fallen to their lowest level in a decade, and most automakers are struggling with overcapacity there. Ford said the region’s problems are ‘more structural than cyclical’ and would not improve any time soon.
Ford’s chief financial officer, Robert Shanks, called the deteriorating market conditions in Europe ‘very, very serious.’
The company will cut production of vehicles in the third quarter in Europe, lay off temporary workers and slow the speed of its assembly lines, Mr. Shanks said at a news briefing at Ford headquarters.
But Ford is not ready to make major structural moves, such as closing a plant or cutting full-time workers in Europe. Mr. Shanks said management is considering longer-term plans ‘to address the situation.’
The bleak performance in Europe overshadowed Ford’s strong performance in North America, where it reported a $2 billion operating profit.
The company’s US profits remained strong ($2 billion in operating profits), which is an indicator of how the American economy has rebounded and how Ford has restructured to reduce its costs. However, it’s the problems in Europe that could spell trouble for US manufacturers in coming months as a slowdown there could affect exports and reduce demand for products, leading to another round of job cuts or production rollbacks.
Ford does appear to be in a strong position to weather its problems in Europe; it has $33.9 billion in cash and assets available, though the company admits that it didn’t anticipate how quickly the situation in Europe has deteriorated.