Ford to lose more than $1bn as European sales plummet

Car giant Ford yesterday predicted it will lose more than $1 billion (£646 million) in Europe this year as rival Peugeot, which is planning to cut 8,000 jobs, fell deeply into the red during its first half.

Ford’s new outlook for the region, where car sales fell to a near 20-year low during the first six months of 2012, is nearly double its previous forecast for an annual loss between $500m and $600m.

However, some analysts warned the situation could deteriorate further as the economic crisis deepens. Guggenheim Securities analyst Matthew Stover said: “I’m certain Ford is underestimating the situation there, but I think everyone is. We haven’t seen the worst yet.”

Chief executive Alan Mulally said the group is reviewing all aspects of its business in Europe, which accounted for around 25 per cent of sales last year.

To stem the losses in the near term, Ford is laying off temporary workers, shortening work days and slowing the rate of assembly lines. Chief financial officer Bob Shanks said the group has also reined in spending on sponsorships and advertising, particularly in countries where sales are lowest.

He added: “As we look over the next five years and lay out all of our plans for our business, we just think the situation in Europe is going to be challenging.”

News of Ford’s gloomier assessment came as PSA Peugeot Citroen posted a net loss of €819m (£641m) for the first half of the year, which compares with a €805m profit a year ago.

Revenues fell 5 per cent to €29.6bn and the group said it expects its European market to contract by 8 per cent this year.

Peugeot announced earlier this month that it would close a major factory at Aulnay near Paris and cut 8,000 jobs as part of a plan to save €2.5bn by 2015.

Chairman Philippe Varin said: “The group is facing a difficult time.

“The depth and persistence of the crisis impacting our business in Europe requires the launch of the reorganisation of our French production and a reduction in our structural costs.”

On Tuesday, Swedish car maker Volvo reported a 5 per cent fall in second-quarter profits, while Mercedes-Benz owner Daimler yesterday posted an 11 per cent decline in profits for the quarter.

European car sales may not return to pre-crisis levels until 2017, Renault warned this month, but Jaguar Land Rover provided some cheer for Britain’s car industry yesterday by announcing plans to create more than 1,100 jobs at its Castle Bromwich plant in the West Midlands.

The expansion of the workforce at the site will support the launch of further Jaguar models, including the XF Sportbrake.

Jaguar – formerly part of the Ford group but now owned by India’s Tata – has sold more than 29,000 vehicles in the first six months of this year, a 19 per cent increase on the same period last year.

Ford, which lost $404m in Europe during the second quarter, saw its overall net income fall to $1bn, down sharply from $2.4bn a year ago, on revenues 6.2 per cent lower at $33.3bn.

The fall in net income was partly due to an accounting change that raised the car maker’s effective tax rate to 37.3 per cent from 8.4 per cent in 2011.