Ford profit drops 58 per cent as Europe losses deepen | CarAdvice

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Ford profit drops 58 per cent as Europe losses deepen

By Tim Beissmann
FIND DEALS

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.


 

  • Phillip

    I thought the Focus was doing alright in Europe…

    • pixxxels

      It is, comparatively. Its just an industry wide problem in Europe. For example, Ford Europe lost ~$150 million in Q1, which has now more than trebled. GM Europe lost twice as much in Q1 – $300 million – and if the pattern continues and that trebles too… thats a billion dollar loss. GM hasn’t released Q2 figures yet, but is surely bracing for the worst.

      • MP

        Damn, that blows. This inevitably means less R&D and more cost-cutting and platform hoaring (sic), which will be worse for consumers all over the world.

  • Legnab

    TOO many euro factories , not enough sales , facing the same problem we have, expensive labour , most will end up in asia , watch india/ thai/china take the lions share .

    • Mike

      Europe has its own cheap labour backyard – Slovakia, Romania etc. Ford and GM are based mostly in England and Germany, where it is indeed hard to be profitable, particularly without luxury divisions and without the pricing power to match VW’s.

      • Smart US

         you must be a real lumen putting Slovakia and Romania in one sentence… check the salaries and GDP per capita next time… Slovakia is just little behind New Zealand.. meaning its “cheap labour backyard” for Australia???

        • F1

          Well next time make sure you look at the Nominal Per Capita GDP and not the counterfactual PPP

    • moonie

      Everyone is losing money in Europe as the politicians sit with their thumbs up their backsides and the economists follow the “solutions” in their uni textbooks.

      China/India/Thai still have a problem with putting all the screws in.

  • Sydlocal

    It is interesting that the Ford arms that are making their best cars are the ones that are losing the most money. Any explanations?

    • Robin_Graves

      Majority of consumers are retards.

      • pixxxels

        Case in point: the Corolla is the 3rd best-selling car in Australia in 2012 & people still buy the Triton. There is literally no other explanation. 

      • Legnab

        If we are all retards we should be driving falcoons , we woke up and realised there are cheaper better designed choices .

        • Phil

          He said ‘majority’, not ‘all’.

          • Rooster

            Correct phil , i was thinking about all of us VW drivers being retards as the grave robber believes . 

          • Garrywhopper

            Yes well I learnt my lesson with VW, never again will I own one 3 out of 12 months in the shop with engine and transmission problems

          • Legnab

            Garyfloppy you would not be capable of reading the dash on a VW let alone owning one , get a spell checker .

          • Garrywhopper

            Im sorry you don’t believe that VW have a problem but they do, you are a fool to deny it with all the evidence around. I was burned badly by it you should be glad you own a 2001 model before these problems surfaced

          • Legnab

            Floppy/nemo  , drama queens will always exaggerate their belief in perceived problems in a rival brand .

            You stick to comments on crummers and falcoon problems .

      • simonsez

        Unlike you (of course) who seems incapable of using a more civilised pejorative.

    • http://pulse.yahoo.com/_YQLKLFNYP3UFBFAGOV2LNDSREA Robert Ryan

       Problem with their “best cars”, they are not good enough. Others like VW have not had the same vicious downturn. Ford and GM in Europe have massive problems. “One Ford” has not solved problems but added to them. Since “One Ford” was introduced, both the European and Australian operations have nosedived.. Even in other trying times in the past, downturns for Ford were never this bad.

      • James

        Maybe it’s a foreign company thing…

        • Captain Nemo®™

           I think you’re right James.  Europeans rather buy mediocre junk like VeeDud simply because its German owned.    Rather than a superior Focus/Astra because of their parent company’s American origins. 

          • Rooster

            Get a grip corporal nemo regd , europeans realise ford germany is being dragged down by the medioca US division , sucking their cash and their tech , hence savy people are buying VAG products because just like here FORD will probably disappear as a maker .

    • Legnab

      So true all of fords best product is developed in europe but US takes the glory , now using a lot of euro sourced product beacause it is better designed and far more economical .

      • F1

        Like the euro-sourced 1.4L Cruze engine which catches on fire?

  • Peanut

    I still don’t understand the One Ford Plan.
    How many unique models are still made for America only.
    When is the One Ford Plan to be fully implemented?

    • http://pulse.yahoo.com/_YQLKLFNYP3UFBFAGOV2LNDSREA Robert Ryan

       Add Unique models in Latin America as well. “One Ford:” is pretty selective.

    • super_hans

      The Fiesta was the first model to be deployed under this policy followed by the Focus and Ranger, with the Mondeo and Escape/Kuga to follow. So its only now the global models are hitting the market and the remaining product lines will be rationalised with the next model cycle. Its more or less the strategy that VW among others already employ, it takes years to fully implement

      • http://pulse.yahoo.com/_YQLKLFNYP3UFBFAGOV2LNDSREA Robert Ryan

        VW does  not employ a “One VW” strategy. VW ranges from Audi , Lamborghini to Ducati. Not counting the various truck makes they now own. The Focus and Fiesta are not exactly setting the world on fire. Ford has major problems, management needs to be changed to a less US Centric one.

        • MattW

          It may not be called a “One VW” policy but it works in the same way across the brands… how many vehicles will be based off the upcoming MQB platform? Audi A3, VW Golf, Seat Leon, Skoda Octavia, VW Tiguan. The Tuareg, Cayenne & Q7 off the same platform as well. You’ll find the same engines used across the different brands as well. The cars on their own platform are ultra high profit cars like 911s and Lambos

          These economies of scale would work well even if they were all “cheaper” cars, that they sell cars with a “premium” profit margin like the Audis off these makes it fantastic for the bottom line

    • MattW

      Not that hard really… as each platform comes to the end of its life cycle and and is due for an update, you either drop it (like the Falcon will be dropped in 2016) or upgrade it to fulfill all needs for that market segment worldwide (one platform as the base for Focus, Kuga, C-Max, etc, same platform for Fusion & Mondeo, the next Mustang is being engineered for LHD & RHD). Not sure what they are going to do with the F-150, its a major cashcow.

      Implementation in reality takes a full platform lifecycle, say 7 years

  • Mad Max

    I wonder if the terrible marketing we see from Ford Australia is indicative of the marketing by Ford in Europe and other markets. I don´t know but if Ford head office in the USA recognise it, why don´t they make changes in Australia? Perhaps its just as hopeless in Europe and they don´t know how to make the changes. Ford say the losses in Europe are due to prices being low and incentives being high. But surely this would also be the storey at all the manufacturers. Apart from GM/Opel and Peugeot, I don´t read stories about the other manufacturers being in similar problems. Maybe they are and its not widely published?

  • gt86.com.au

    Its like any industry nowdays.. unless you are in the TOP 2.. maybe 3 for a segment..it becomes very hard to be profitable. Unfortunately for Ford, other makers are just that 10% better in most aspects and people prefer Best value rather than the cheapest more often then not!

    • TR

      People prefer not to be seen in a bogan-mobile 

  • Laurie

    I won’t say anything against f… otherwise I get moderated as my replies get deleted!

  • Guest

    Good cars, crap service. What do you expect?  Treat your customers with a bit of respect, make them happy and you may sell a few more vehicles. Every Ford I have owned has been ok but the service is atrocious. Dealers are a joke, FOA takes weeks on end to get anything done. Now you pay the price.