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by Tim Beissmann

A US$1 billion ($969 million) second-quarter profit for Ford Motor Company has been soured by massive losses from the brand’s embattled European division.

Ford’s global profit was less than half the size of the US$2.4 billion ($2.3 billion) it achieved in Q2 2011, with almost half of the difference between this year and last accounted for by losses in Europe.

Ford Europe returned a US$404 million ($392 million) loss in the second quarter of 2012, US$580 million ($562 million) adrift of its US$176 million ($171 million) profit in the corresponding quarter in 2011.

Ford says the poor financial result is a reflection of the “deteriorating external environment in Europe”, and was compounded by low sales, subsequent production adjustments, lower vehicle prices and higher customer incentives.

With Ford Europe’s 2012 losses now totalling US$553 million ($536 million), the manufacturer is bracing for a full-year deficit in excess of US$1 billion.

Ford executive vice president and chief financial officer Bob Shanks says the company understands the seriousness of the situation in Europe and believes the challenges the industry faces are more structural than cyclical in nature.

“We have faced challenging situations in other parts of the business before, and successfully addressed them through our One Ford plan,” Shanks said. “We will continue to use our plan as the guide to address challenges and opportunities in our valued European operations.

“We are reviewing all areas of our business to address the near-term challenges, while ensuring we build a strong foundation for our future. It is premature to discuss details of what our plans may be in response to the situation in Europe, but we will continue to communicate our plans at the appropriate times with all of our stakeholders.”

Ford North America remains the backbone of the business, recording a US$2.01 billion ($1.95 billion) profit in the second quarter, which was up US$102 million ($99 million) over the same period in 2011.

Ford North America’s first-half profit was 10.4 per cent up on 2011’s, and the manufacturer expects a “significantly higher pre-tax operating profit and margin” compared with 2011 on the back of the recently released Escape SUV and the upcoming Fusion medium sedan.

Ford Asia Pacific Africa – the division that includes Ford Australia – lost US$66 million ($64 million) in the second quarter after turning a US$1 million ($968,000) profit last year.

Ford is not the only manufacturer feeling the pain in Europe. Earlier this month, Karl-Friedrich Stracke stepped down from his position as General Motors Europe president as the division works towards restructuring its operations to turn around a decade of losses.

Embattled French group PSA Peugeot Citroen was also forced to cut 8000 workers in Europe two weeks ago as it aims to cut costs and streamline its business.




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