Ford earnings drop massive in European theater

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Artist's rendition of the Ford logo.

Ford is losing money hand over fist in Europe. (Photo Credit: Public Domain/Lispir/Wikipedia)

All is not well overseas for the Ford Motor Co. The Detroit News reports that the automaker revealed today that it is increasing its loss projection for Ford in Europe. The Ford earnings drop for Europe this year is on pace to almost double the previously projected loss level of $1 billion. The euro zone financial crisis, which has featured ample servings of runaway debt and high unemployment, is believed to be a major factor in Ford’s lackluster European sales performance.

Ford sees pre-tax profit of $8.8 billion

Ford projects an annual pre-tax profit of $8.8 billion for the quarter, which is in line with 2011 figures, but still lower than originally anticipated. Ford recorded a global profit of $1 billion in the second quarter, a 58 percent drop compared with the $2.4 billion from the same quarter in 2011. Internationally, $465 million was lost during the quarter, $404 million of which came from under-performance in Europe.

The quarter’s $1 billion profit led to an earnings-per-share of 26 cents for Ford, a 59-cent drop compared with the previous year. Wall Street had predicted 28 cents per share, according to a survey by 16 analysts at Thomson Reuters.

Dismal international projections from Ford

Last month, Ford Motor Co. revealed that it expected losses of $570 million internationally during the quarter, which would be a whopping three times worse than the previous quarter of 2012. Again, 80 percent of the losses were set to come from disappointing European Ford sales. Over the first half of 2012, Ford sales in Europe dropped 10 percent, according to sources.

Ford CEO Alan Mulally admitted that Ford isn’t the only U.S. automaker that has been stung by horrific performance in the European theater.

“We are assuming that this is a structural issue,” Mulally said. “It’s not going to come back fast and be saved by volume. I think you’re seeing the same viewpoint from most of the automobile companies.”

Possible Ford plant closures

In order to plug the European sales sinkhole, experts predict that Ford will need to close down one or more of its European assembly plants. Possibilities include Southampton, England and Genk, Belgium, reports indicate. Ford CFO Bob Shanks declined to discuss the details of any potential plant closures, but did note that the automaker is prepared to cut back in other ways, including shorter work days, line reductions and layoffs.

“We always have to have a base assumption,” Shanks said. “There’s always volatility in our business. As we develop our plans … you’ve got to build in enough of a cushion … to be satisfied you will be profitable in an environment that is less robust than the assumption.”

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The Detroit News

Southgate News-Herald

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