Ford’s profitability in Europe is hurt by excess plant capacity

Article by Anita Panait, on July 22, 2012

With General Motors and PSA/Peugeot-Citroen announcing planned plant closures and employee layoffs in Europe for the past six weeks, Ford Motor Co. may soon follow suit by closing at least one factory in the continent. Seeing a chunk of its profits eaten away by losses in its European operations, Ford could be contemplating to shut down its assembly plants in Southampton, England, and Genk, Belgium.

Ford divulged in June that it will report "substantially lower" second-quarter earnings after posting $570 million in losses from operations in Europe, Asia and South America.

Ford is currently using just 63 percent of its capacity in Europe, where the carmaker may log more than $1.1 billion in pre-tax losses for 2012, according to Adam Jonas, an analyst at Morgan Stanley. Jonas told Bloomberg that their calculations show that Ford's capacity utilization in Europe is even lower than GM and other carmakers, except for Fiat.

Morgan Stanley remarked that Ford must address its excess-capacity problem with decisiveness “to stay ahead of the wave." In contrast to Morgan Stanley’s calculations, IHS Automotive estimated that Ford's capacity-utilization in Europe is higher than GM at 66 percent to 62 percent. Either way, Ford still faces a big problem, since carmakers need to utilize at least 80 percent of their capacity to post a profit.

Ford is currently employing the strategy crafted by chief executive Alan Mulally to produce cars only when there is a real demand. According to Ford, it is developing a plan to match capacity to demand in Europe, where it earned $1.73 billion since 2007, but succumbed to losses in two of the last three years. GM, meanwhile, has been posting losses in Europe since 1999, racking up a total of $16.4 billion.

Topics: ford, europe, profit

If you liked the article, share on:

Comments

Recommended

One of the executives at Volkswagen tagged in the so-called Dieselgate scandal has pleaded not guilty to a list of allegations surrounding the carmaker’s actions to cheat emissions regulations in...
by - February 27, 2017
When the Crown De Luxe saloon was first released in 1972, it was at that time the most lavish Toyota model available to British customers. Both unusual and exclusive, one...
by - February 27, 2017
The ride-sharing fleet of sharing Lyft Inc. will soon include thousands of specially fitted self-driving Chevrolet Bolt electric vehicles, courtesy of General Motors. If plans push through, Lyft’s clients would...
by - February 27, 2017
J.D. Power has officially released the 2017 Vehicle Dependability Study, an annual list of the most dependable brands in the auto industry. Once again coming on top is Lexus, the...
by - February 26, 2017
Citroen revealed that its entry to the Chinese market is moving forward with the planned release of the new generation C5. While still on sale on this part of the...
by - February 26, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries