Ford is struggling with its overseas operations as negative economic conditions are weighing down the company’s sales. Ford, which has been doing well with its North American sales, said its international losses will tripple in the second quarter. Losses in Europe will account for a majority of the total with a 159 million dollars loss.
Ford is now left importnant decisions to makover its struggling European operations. Ford’s CFO, Robert Shanks, described the problem as a structural problem, not a cyclical one. Options are being weighed, which include more investment, plant closures and utilizing execss capacity at some of its plants. Ford could follow the same path as General Motors, which has decided to close down a plant in Europe to help its struggling operations there.Butthis can cause capacity problems as work gets shifted to other plants. These plants will need significant investments to allow them to produce to their maximum output.
Mr. Shanks stressed concern over its Europe operation if the econimic situation does not improve. “If theleaders in Europe are not able to come up with a really good plan to satisfy the financial markets, there could be severe consequences.” Ford currently hold an 8% market share in the European market, but but that number will need to increase if Ford hopes to break-even in Europe anytime soon.
In the Asian market, Ford reported a 95 million dollar loss citing struggles of competitive forces and pricing pressures. Ford has been way behind its American sibling General Motors in catching on the the Asian market, particularly in China. Because of its late entry, Ford still faces heavy investment decision to catch up to its rivals in this market.
Do you think that Ford will ever reach point where it can be finically profitable consistently overseas? Or will international competitors continue to stay one step ahead of Ford?