Ford forecasts $2bn loss in European market as prolonged recession hits sales

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The Independent Online

Europe dealt another blow to the American car-maker Ford, which forecast a $2bn (£1.3bn) loss at its continental operations this year, a drag on its performance even as its home market improves.

Gains in North America helped the company to beat Wall Street estimates in the fourth quarter of last year, with Ford reporting 31 cents in pre-tax operating profits per share, above the 25 cents pencilled in by analysts.

Hidden inside the numbers, however, was some nasty news from Europe, where the company raised its estimated loss. The $2bn figure includes around $500m in restructuring costs, as it attempts to turn around the European division. The firm's finance chief, Bob Shanks, said that with a eurozone recession likely for the full year, "clearly, we still have some difficult time in front of us". But he told reporters: "We do think it will probably bottom this year."

By contrast, Ford expects to make more money this year in North America, its most profitable region. But the No 2 US car-maker also predicted 10 per cent operating margins in North America, smaller than the 10.4 per cent reported in 2012.

The weak outlook overshadowed Ford's better-than-expected fourth-quarter results, and sent the company's shares tumbling by as much as 6.5 per cent on Wall Street. At the stock's low point, the declines wiped away more than $3bn in market value.

The forecast "undercuts the popular investor thesis that Ford offers significant earnings expansion from a booming US auto market while having 'Europe-proofed' its guidance," said Brian Johnson, an analyst at Barclays Capital, in a research note.

It was the fourth time in 12 months that Ford had ratcheted down expectations for Europe. It expects the industry to sell between 13 million and 13.5 million vehicles in the region this year. At the bottom of that range, sales in Europe would sink to their lowest level since 1993, according to the automotive consultancy IHS Automotive. Ford's shares closed 64 cents lower, or 4.64 per cent, at $13.14 in New York.