Ford fears new potholes in Europe
On Tuesday, Ford startled the industry again by predicting that Europe, a critical market, would get worse before it begins improving later this year.
Ford said European car sales, including commercial vehicles, could fall as low as 13 million this year, and its annual losses in the region could reach $US2 billion ($1.91 billion). Europe is Ford's second-largest market after North America.
"The industry did 14 million last year, and that was the worst in 20 years," Ford's chief financial officer, Bob Shanks, said. "The industry is continuing to decline and we think 13 million is the trough."
The dire predictions for Europe overshadowed what were otherwise positive fourth-quarter results.
The company reported a 54 per cent rise in adjusted fourth-quarter profit as strong earnings in North America compensated for heavy losses in Europe. Ford said it earned $US1.6 billion in the fourth quarter.
For the full year, Ford earned $US5.67 billion, a 5 per cent drop from $US5.97 billion in 2011, excluding tax-valuation changes.
The market in western Europe remains abysmal, but some analysts agree with Ford's assessment that sales may be close to a low point and could start to recover late this year as the eurozone crisis subsides.
Analysts at Goldman Sachs forecast that European vehicle sales would fall another 2.2 per cent in 2013, to 12.9 million vehicles. But they will rise 3.9 per cent in 2014, Goldman predicts, as customers start to feel more secure about their economic prospects.
In the meantime, companies such as the General Motors Opel unit and PSA Peugeot Citroen are trying to make broad reductions in jobs and production capacity. The recovery, if it comes, could be too late for many workers - and some manufacturers.
North American sales have been a bright spot for the world's carmakers, and Ford is no exception. Its overall revenue in the fourth quarter was $US36.5 billion, up 5 per cent, and for the full year sales were $US134.3 billion, down 1 per cent.
Healthy sales of new vehicles in North America resulted in good profit margins, particularly in the US, where the overall industry grew 13 per cent last year.
Ford plans to reduce its production capacity in Europe by 18 per cent and eliminate 5700 jobs by next year. The company will close an assembly plant in Belgium and two factories in England.
Frequently Asked Questions about this Article…
Ford warned that Europe — its second-largest market after North America — could get worse before improving, predicting European car sales (including commercial vehicles) could fall to about 13 million this year and that annual losses in the region could reach roughly US$2 billion.
Ford reported an adjusted fourth-quarter profit of US$1.6 billion, a 54% rise, and earned US$5.67 billion for the full year, about a 5% drop from US$5.97 billion the prior year (excluding tax-valuation changes).
To address weak demand, Ford plans to reduce production capacity in Europe by 18% and eliminate 5,700 jobs by next year, including closing an assembly plant in Belgium and two factories in England.
Ford’s overall fourth-quarter revenue was US$36.5 billion, up 5%, and full-year sales were US$134.3 billion, down about 1% compared with the prior year.
Ford said the industry did 14 million vehicles last year — the worst in 20 years — and expects a trough of about 13 million. Analysts at Goldman Sachs forecast European vehicle sales would fall another 2.2% in 2013 to 12.9 million, then rise 3.9% in 2014 as economic confidence improves.
Strong North American sales helped offset heavy European losses: healthy new-vehicle sales in North America produced good profit margins, contributing to Ford’s improved adjusted fourth-quarter profit.
Yes. The article notes that other manufacturers — including General Motors’ Opel unit and PSA Peugeot Citroen — are also making broad reductions in jobs and production capacity as the European market struggles.
The article highlights that Ford faces significant near-term challenges in Europe, including potential US$2 billion regional losses and major factory and job cuts, while North America remains a bright spot. Investors should be aware that Ford’s overall earnings are being supported by North American strength even as Europe drags on results, and analysts expect a possible recovery in European sales late in the year if the eurozone crisis eases.
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