Ford readies turnaround plan as it expects over $1 billion loss in Europe

Article by Anita Panait, on August 16, 2012

Ford Motor Co. is conducting a review of all aspects of its business in Europe as the company labels its performance in the region as not acceptable. According to Stuart Rowley, Ford’s controller, the results of the carmaker’s European business for the last 12 months are not acceptable, and the company needs to address that situation.

Rowley said that during the review, the carmaker will address all aspects of its business, including its structural costs, product portfolio and brand. Analysts like Adam Jonas of Morgan Stanley have been suggesting that Ford should shut down at least one factory in Europe in order to cut its excess production capacity in the region. According to Morgan Stanley, Ford is only using 63 percent of its production capacity in Europe.

Ford posted a 57-percent drop in its net income for the second quarter of 2012 to $1.04 billion, no thanks to $404 million in operating losses in the same period in Europe. Rowley, for his part, said that the Ford’s cost in Europe has meant that the company is stuck. He then pointed to Ford’s North American business as a good guide.

The current economic crisis in Europe is foiling the company’s revival plans masterminded by its chief executive, Alan Mulally. The dire situation at the continent has forced Ford to cut its profit forecast for the full year, saying that it could no longer match the $8.8 billion pretax operating profit posted in 2011.

The company is expecting is European operations to post more than $1 billion in losses for 2012. Ford chief financial officer Bob Shanks has said that the European market, which accounts for around a quarter of the company’s total revenues, will remain difficult for at least five more years.

Topics: ford, loss, europe, plan

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