Another UK price rise from Ford

Ford has announced another round of price rises for the UK; on average its cars will be 2.7 per cent more expensive when the changes are implemented at the end of this month, although the hot Focus RS and some Transit vans will not be affected by the increases.

Ford has had to make several small price increases over the last year or so in order to try to offset the damage that the strength of the Euro is doing to its UK bottom line. The company now makes most of the cars it sells here in continental Europe, and has been badly hit by the depreciation of the pound against the Euro by about 30 per cent since 2007.

Given that the UK is Ford's second-biggest market worldwide, it appears odd that the company should have shut down so many of its British operations, allowing such a big mismatch of production and sales between different currency areas to arise.

However, when Ford decided a few years back to close its last remaining British assembly facilities for cars carrying its own badge, it still owned substantial UK production sites – since disposed of - for Land Rover, Jaguar and Aston Martin, from which large numbers of high-value vehicles were exported to North America and the Eurozone. This pattern of activities probably left Ford much better hedged in currency terms on a group-wide basis than it is today.

One open question is the extent to which Ford can make these price increases stick; several of its models have long been available at large discounts via websites such as drivethedeal.com, and some of its competitors have held their prices back.

While the sterling/Euro rate is causing Ford plenty of headaches, the company is generally held to be doing well under the leadership of Alan Mulally, who was brought in from the aircraft manufacturer Boeing. He had the foresight to mortgage billions of New Chevrolets perform well in Euro NCAP crash testsdollars worth of Ford's assets before the recent economic downturn, giving it a financial cushion that has helped it to weather recent difficulties more easily than its American competitors, General Motors and Chrysler.