DEARBORN, Mich. – Just three years after Ford revived its American business, the company is planning an even trickier turnaround in Europe, where mounting losses weighed down its second-quarter results.
Fords net income fell 57 percent to $1 billion in the April-June period, largely because of a $404 million loss in Europe. Car sales there have tumbled to 20-year lows because consumers lack confidence in the economy. Ford expects to lose more than $1 billion in Europe in 2012, double its estimate from the beginning of the year.
The company declined to give details about its turnaround plans Wednesday, but analysts say layoffs and plant closures are inevitable. Europe is vital to Ford. A quarter of its sales and profits come from the region, which is Fords largest market after North America. Four straight quarters of losses in Europe are taking a toll.
This is a very serious situation, Chief Financial Officer Bob Shanks said after Ford announced quarterly results Wednesday. Its going to take quite a long time for Europe to work through these issues.
Ford is already trying to stem losses in the region by laying off temporary workers, slowing line speeds and shortening factory shifts. The company has also cut advertising and sponsorships.
But analysts say Ford will have to go much further.
The company has no choice but to close factories, said Morgan Stanley auto analyst Adam Jonas. He estimated Ford is using only 63 percent of its plant capacity in Europe. That means Ford is paying to keep facilities open even though 40 percent of their space isnt being used.
Ford officials declined to confirm that number.
Ford earned $1 billion, or 26 cents a share, in the quarter, down 57 percent from $2.4 billion, or 59 cents, a year earlier.
Quarterly revenue fell 6 percent to $33.3 billion.
Fords $404 million loss in Europe compared with a profit of $176 million a year ago.
Sales of cars and trucks in the region fell 15 percent.
Ford also lost market share as it refused to ramp up deals to lure buyers, as many German automakers have.