Ford Motor Co. will incur $800 million in one-time pretax charge in the fourth quarter of 2014 as the inability to exchange US dollars for Venezuelan bolivars has limited its operations in the South American country. According to a filing, it will not record the $500 million cash balance in its Venezuelan operations in its automotive gross cash, counting these cash and income only when Ford is paid for parts sold to the unit or it pays dividends to the parent.
According to Ford, the one-off will cut its net income in the quarter by around $700 million, although it doesn’t impact its around $6 billion in full-year pretax profit forecast. Joseph Amaturo, analyst of Buckingham Research, remarked in a note that Ford's announcement will be regarded negatively.
Venezuela President Nicolas Maduro recently restructured currency controls in his country, where dollars are sold for about 180 bolivars to the US dollar.
Prior to that, Venezuela has three-tiered exchange rate system in which the trading ranges from 6.3 bolivars to about 50 bolivars to the dollar. Ford posted $8.57 billion in pre-tax profit in 2013 and warned in January 2014 that it Venezuelan operations could hurt its results for the full year.
Ford said in an April 1, 2014, filing that it was taking a $350 million charge to revalue the Venezuelan bolivar, adjusted its exchange rate to 10.8 bolivars to the U.S. dollar, compared with the prior 6.3 rate.