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Ford of Europe reports $196 million Q3 loss

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Ford of Europe reports $196 million Q3 loss

Douglas A. Bolduc

Automotive News Europe -- October 26, 2010 13:15 CET

Ford of Europe reported its first quarterly loss since early 2009 as falling unit sales and rising raw material costs took their toll.

Ford Motor Co. said Tuesday that its European unit had a pre-tax operating loss of $196 million, compared with a profit of $131 million a year ago. Ford of Europe reported Q3 revenues of $6.2 billion, down from $7.3 billion a year ago.

Ford blamed the decline on an overall sales slowdown in Europe, higher commodity costs and its need to spend money to cover the launch of new products such as the Focus compact, Focus-based C-Max minivan and a refreshed Mondeo mid-sized car.

European car registrations fell 9.2 percent to 1.26 million vehicles in September from 1.39 million a year earlier, according to industry association ACEA. Nine-month sales dropped 3.7 percent to 10.6 million. Ford's sales dropped 20 percent to 108,700 units in September and ended the first nine months down 10 percent to 876,475 cars, according to ACEA.

Ford of Europe's last quarterly loss was a $585 million decline that came in Q1 2009.

A Ford of Europe spokesman said that Europe's third-quarter sales were comparable to the results seen at the start of the global economic downturn in late 2008 and early 2009.

Ford Motor said its overall automotive structural costs were $700 million higher than a year ago, and commodity costs were $750 million higher.

Ford expects full-year structural and commodity costs each to be about $1 billion higher than a year ago. The higher structural costs are needed to support Ford's product offensive, the company said. The U.S. automaker did not reveal how much of its additional costs would come from Europe.

Big profit overall

Despite the troubles in Europe, Ford Motor on Tuesday reported record overall third-quarter profits, raised its production forecast and said it will speed up steps to trim its debt.

Ford's $1.7 billion in net income was up from $997 million a year earlier. The company said it will boost fourth-quarter vehicle output in North America and Asia but expects no gain in South America and a production decline in Europe.

The results marked Ford's sixth straight quarterly profit, and Chief Financial Officer Lewis Booth said the automaker will be "solidly profitable" in the current quarter, too.

"This is a very solid year in total, and we're projecting continued improvement next year," Booth said at a media briefing. "You can see our plan is beginning to work. We're very encouraged by that."

Revenue fell $1.3 billion from a year earlier to $29 billion, reflecting the August sale of Volvo. Excluding Volvo, revenue rose $1.7 billion.

The automaker said it will reduce its debt by a total of $10.8 billion this year, resulting in a zero net debt position by year-end.

In the second quarter, Ford had said it would have zero net debt by the end of 2011. Zero net debt means Ford will have the same amount of cash as it does debt, and will help the automaker return to an investment-grade credit rating.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101026/ANE/310269937/1193#ixzz13UAxSB11

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