Ford predicts a $2 billion loss in Europe this year

Article by Christian A., on January 30, 2013

Ford Motor Co predicted a loss of $2 billion in Europe this year as the industry struggles because of a recession that could bring down industry sales in the region to its lowest in 20 years. On the other hand, Ford expects that it will gain a profit in North America, its most profitable market. However, Ford estimates that it will achieve 10% operating margins in North America, lower than the 10.4% reported in 2012.

The weak outlook dampened its fourth-quarter results, which were higher than forecasted, pulling down its shares by up to 6.5%. At the stock's low point, the decreases eradicated over $3 billion in market value. In a research note, Barclays Capital analyst Brian Johnson wrote that this forecast "undercuts the popular investor thesis that Ford offers significant earnings expansion from a booming U.S. auto market while having 'Europe-proofed' its guidance."

This marks the fourth time in 12 months that Ford lowered its expectations in Europe, demonstrating how hard it is for automakers to foresee and handle the quick decline of sales in the region. Ford thinks that this year, the industry will be able to achieve sales of 13 million to 13.5 million vehicles in Europe. Automotive consultancy IHS Automotive said that the lower end of this range would be the lowest level that Europe has sunk to since 1993.

Chief Financial Officer Bob Shanks said that it’s likely that the euro zone will be in a recession for the entire year and that it will hit bottom this year too. Ford gets the biggest share of revenue and profits from North America while Europe is ranked second. Ford now believes that it will post higher losses in Europe in 2013 compared to the $1.8 billion loss posted last year.

Topics: ford, europe, loss

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