Ford Motor Co.
(
F
) revealed that it would opt for production capacity cuts in
Europe on top of its recent downsizing in the continent if the
market conditions deteriorate further. At the end of last month,
the automaker announced that it would trim production capacity in
the continent by 18% or 355,000 vehicles.
Ford had revealed that it would retrench 6,200 jobs and close
three facilities in Europe. The company plans to shut down a van
factory in Southampton, Britain and an associated stamping and
tooling facility in Dagenham, east London in 2013 as well as a
major plant in Genk, Belgium the following year. These production
cutbacks are expected to save about $450 million to $500 million
in annual costs.
Ford saw a broader operating loss of $468 million in the third
quarter of the year in Europe compared with $306 million a year
ago. The decline was attributable to lower volume, offset
partially by lower costs and favorable exchange rates. Further,
the company expects to lose $3 billion in the region considering
both 2012 and 2013.
The present Euro zone financial crisis has affected the
operations of many global automakers, especially Ford and
General Motors Company
(
GM
). Both the automakers have a significant exposure to the market.
In order to reverse the 12 years of losses in Europe,
particularly from the Opel brand, GM formed a global alliance
with
PSA Peugeot Citroen
(
PEUGY
). The pact will help both the automakers reduce at least $2
billion in costs. In order to strengthen the market position, GM
also plans to expand Opel's lineup by introducing 23 models by
2016.
Ford, a Zacks #3 Rank (Hold), posted a 17.6% rise in earnings per
share to 40 cents in the third quarter of the year from 34 cents
a year ago, driven by impressive results in its North American
operation and, to some extent, its Asian operation. With this,
the company has also beaten the Zacks Consensus Estimate by 10
cents per share. Total profit rose 15.6% to $1.6 billion from
$1.4 billion a year ago.
However, total revenue in the quarter slid 3.0% to $32.1 billion
due to lower revenues in South America, Europe and Financial
Services operations that offset the marginal improvement in
revenues in North America and Asia. However, revenues were higher
than the Zacks Consensus Estimate of $31.0 billion for the
quarter.
Ford plans to restore profitability in its European operations
by mid-decade and aims to achieve a long-term operating margin
between 6% and 8%. The company continues to anticipate 2012
market share in Europe to be lower than 8.3% in 2011.
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis
Report
(PEUGY): ETF Research Reports
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