$404M loss in Europe drags Ford profit down

7/28/2012

DEARBORN, Mich. — Ford Motor Co. said Wednesday that its second-quarter profit dropped 57 percent on slower sales and wider losses in its troubled European operations.

Ford said it earned $1 billion in the quarter compared with $2.4 billion in the same period last year. While its core North American business continued to perform well, Ford reported a loss of $404 million in Europe and now expects to lose more than $1 billion there this year.

The automaker said for the first time that its overall 2012 operating profits would fall from last year's results because of the economic crisis in Europe.

Ford's chief executive, Alan R. Mulally, said the company was determined to fix its European business with the same tactics it used to turn around its North American operations. But with the European car market in its worst slump in more than a decade, Mulally said a comeback would take time.

Other automakers are struggling in Europe, including Ford's Detroit rival, General Motors, which is expected to report a large loss in the region on Aug. 2 when it releases second-quarter earnings.

Ford made money in Europe in six of the previous eight years and was profitable as recently as the first half of 2011.

Those days appear long gone. With some countries in Europe posting sales declines of 20 percent and higher, Ford's second-quarter loss was nearly three times greater than in the first quarter.

Revenue in Europe fell to $7.1 billion in the quarter compared to $9 billion in the same period last year.

Ford's chief financial officer, Robert Shanks, said Ford had not anticipated such a rapid deterioration in Europe. He called market conditions there "very, very serious."

Shanks said Ford would lay off temporary workers, slow the speed of its European assembly lines and institute shorter workdays. The company said it would cut production by 49,000 cars in the third quarter to keep inventories manageable as sales continue to decline.

Mulally said Ford was not ready to announce any major structural moves, but that the company would not cut investments in new products as part of a restructuring plan.

''Even in the worst of times, we will not back off on our investment in the future," he said.

The bleak performance in Europe overshadowed Ford's strong results in North America, where it reported a $2 billion operating profit in the quarter.