Ford Motor Co. could lose between $500 million and $600 million in Europe this year, the latest sign automakers are struggling in a region blighted by an ongoing sovereign debt crisis and crawling with competition.
Chief Financial Officer Lewis Booth, who is retiring in April, said Wednesday that Ford is on pace for sales at the bottom end of the company's original forecast, which called for between 14 million and 15 million vehicles in Europe. That was already a marked loss from 15.3 million vehicle sales in 2011.
We think Europe is much more likely now to be at the bottom end of the scale, Booth told reporters at Ford's global headquarters in Dearborn, Mich. He added that if the company's expectations came to fruition, it would likely see the net losses of between $500 million and $600 million. Despite that, he said, the company still expects its operating profit to remain near predicted levels of $8.8 billion for the year, equal to its 2011 operating profit.
We're going to have a tougher time in Europe than perhaps we anticipated at the beginning of the year, Booth told reporters.
Ford's troubles are just the latest for automakers in Europe, a region that has been hit by the continent's sovereign debt crisis and that has seen a massive oversupply as demand has fallen.
Fellow U.S. automaker General Motors Co. said in mid-February it had lost $747 million in European operations in 2011, mostly stemming from huge losses in its Opel unit. That tempered company outlook on its record $7.6 billion profit last year.
In the fourth quarter of last year, Ford reported a $190 million loss in European operations. But Ford doesn't expect such drastic losses thsi year. Booth said Ford has begun trimming costs and production in Europe, citing reduced workweeks at some plants in Europe. He did not say whether Ford would consider closing plants in the region.
They're very concerned about it, Edmunds.com senior analyst Michelle Krebs said last month of automakers' European concerns, discussing GM's losses.
The whole European situation. The (euro zone) debt crisis is lowering car sales from last year to this year. Opel has always been a problem for GM. And there's a huge problem in Europe overall with the total industry. There's too much factory capacity for the demand. It's a very mature market. The market's not going to grow, and yet they've got all this capacity.
On Wednesday, GM and French automaker PSA Peugeot Citreon announced a strategic alliance in which the companies will share vehicle platforms, components and modules and jointly purchase goods and services from suppliers. The companies hope to each save about $1 billion annually within five years to cut down on massive European losses.
Booth, like many Wall Street and industry analysts, expressed skepticism that would solve the companies' problems in Europe.
Putting two car makers together are not going to solve a capacity problem, he said.
Ford's strong North American operations are expected to outweigh losses in Europe. On Thursday, Ford reported a 14 percent year-over-year increase in U.S. sales in February, the company's best February sales month since 2000. Ford's year-to-date sales are up 11.2 percent in the U.S.