(F) Ford Europe Predicts Heavy Loss

Ford Motor Co. (F) revealed that it is likely to lose between $500 million and $600 million in 2012 in the 19 European markets covered by the automaker owing to the ongoing debt crisis in the region. The figure compared with a meager $27 million loss recorded by the company in 2011. In the fourth quarter of last year, the loss amounted to $190 million.

While releasing the fourth quarter results, Ford projected industry volume (including medium and heavy trucks) of 14.0 million units–15.0 million units for full year 2012 in Europe. However, industry-wide sales in the region are expected to reach the lower end of the forecast, according to the Chief Financial Officer of the company, Lewis Booth.

The present Euro zone financial crisis affected the operations of many global automakers, especially Ford and General Motors Co. (GM). Both automakers have significant exposure to the market.

The car dealers in Europe are trying very hard to entice consumers with steep discounts and other sales promotions, which will put a downward pressure on their margins. The West European car market is expected to decline to 11 million units in 2012.

A few months back, GM’s European arm, Opel, revealed that it expects to report an operating loss of €1 billion ($1.3 billion) due to fewer than anticipated car sales. The unit expects to sell 1.4 million vehicles in 2012, which are about 100,000 units less than the earlier projected sales.

In order to reverse the 12 years of losses in Europe (totaling more than $12 billion), particularly from the Opel brand, GM has recently formed a global allowance with PSA Peugeot Citroen (PEUGY). The alliance will help both the automakers reduce at least $2 billion in costs.

Ford, a Zacks #3 Rank (Hold) stock, posted a 34% fall in profit to $797 million or 20 cents per share (before special items) in the fourth quarter of 2011 from $1.20 billion or 30 cents per share (before special items) in the same quarter of 2010. With this, the automaker has missed the Zacks Consensus Estimate by 7 cents per share. Total revenue during the quarter grew 6.5% to $34.6 billion. It was higher than the Zacks Consensus Estimate of $31.8 billion.

For full year 2011, Ford reported a 19% decline in profit to $6.12 billion or $1.51 per share (before special items) from $7.58 billion or $1.91 per share in 2010. However, the company’s profit failed to meet the Zacks Consensus Estimate of $1.84 per share. Revenues in the year increased 13% to $136.3 billion. It was higher than the Zacks Consensus Estimate of $128.2 billion.
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