Ford, which reported a better-than-expected second-quarter profit on Wednesday, doubled its forecast for losses in Europe due to a deepening economic crisis that has pushed overall auto sales to their lowest level in nearly 20 years. The second-largest U.S. automaker now expects to lose more than $1.0 billion in Europe, which is roughly in line with the Street’s $1.1-billion prediction.
Earlier this year, Ford forecast an annual loss of $500-600 million. The company also predicted it would see a lower full-year operating profit compared with 2011 due to steeper losses in Europe and slowing growth in South America.
“As we look over the next five years and lay out all of our plans for our business, we just think the situation in Europe is going to be challenging,” CFO Bob Shanks stated. Ford relied entirely on North America and its financing arm to turn a profit in the quarter, commanding higher vehicle prices in its home market, which boosted operating profit in North America to just over $2 billion.
For the second-quarter, Ford posted a net income of $1 billion, or $0.26 per share, down from $2.4 billion, or $0.59 per share, a year ago. Net income fell partly due to an accounting change this year that raised its effective tax rate. Quarterly revenue fell 6.2% to $33.3 billion, dampened by a $404 million loss in Europe.
To stem the losses in Europe in the near term, Ford is laying off temporary workers, shortening work days and slowing the rate of assembly lines. The automaker also has curtailed its spending on sponsorships and advertising, particularly in countries where sales are lowest, Shanks said.
Ford Motor (F : NYSE : US$8.95), Net Change: -0.11, % Change: -1.21%, Volume: 41,495,706