Ford Motor Co. will take a charge of around $350 million in the first quarter of 2014 after changing its valuation of the Venezuelan Bolivar. Ford is now using an exchange rate of VEF10.8 to the United States dollar, compared with the VEF6.3 rate it used before, the carmaker said in a filing with the U.S. Securities and Exchange Commission.
Ford said in January that it was cutting output in the country because of a possible shortage of hard currency. Ford said it cut output in Venezuela by 75 percent in the fourth quarter of 2013 and planned to keep it this year as car sales in the country continue to slump. Ford COO Mark Fields said in January that the availability of US dollars "is crimping” their ability to pay suppliers.
Ford's currency move came after a warning made in December that it was assuming a "major" devaluation in the bolivar." Bob Shanks, the carmaker’s chief financial officer, said December that recent government moves in Venezuela -- like price controls and a limited and uneven supply of foreign currency to support output -- have adversely affected production and the overall results in the region.
The carmaker warned back then the business environment in Venezuela is volatile and increasingly difficult and unpredictable for its operations.
“Recent government actions in Venezuela, including price controls and a very limited and uneven supply of foreign currency to support production, have affected production adversely as well as the business and overall results in the region,” Bob Shanks, Ford’s chief financial officer, said in December. “The environment in Venezuela is volatile and increasingly difficult and unpredictable for business.” [source: Bloomberg]