Poor old Ford Motor. Despite being the standout producer of the US automotive
industry – avoiding the bankruptcies suffered by General Motors and
Chrysler, its Michigan rivals – it is taking a panel-beating.
Ford deserves better. The carmaker pawned most of its assets, including such
icons as its blue oval logo and the Mustang trademark, for a $24bn war chest
to weather the downturn and turn itself round. It looks to be working. This
spring, Ford became the first of the “big three” to regain investment-grade
ratings.
But unfortunately Europe’s crisis has come the wrong way up the road. Ford
yesterday forecast a smaller pre-tax operating profit this year versus last
as it doubled the anticipated losses from Europe to more than $1bn from an
earlier $500m to $600m. In the second quarter, the carmaker swung to a $400m
pre-tax loss in the region as revenues fell from $9bn to $7bn. Earnings from
Daimler and Peugeot, also out yesterday, provided further evidence of the
dire situation for the car business in Europe.
As the problems have worsened, Ford’s share price has driven off a cliff,
halving since the start of last year to less than $9. That is the lowest
price since December 2009, the first year Ford posted an annual profit after
yearly losses since 2005.
The company said it was taking seriously the issues in Europe – more
“structural” than “cyclical” – and reminded investors that it had faced
“challenging situations” before, a nod to the transformation of its North
American business. But it said it was premature to detail its cost-cutting
plans to manage the problem. Not good enough.
Ford has built a lot of support given its recent record. But its share price
now says otherwise. It needs to act soon.
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