Ford Motor Company (NYSE:F) has increased its European loss forecast to $1.5 billion, signaling a pattern of ever-increasing loss forecasts in the European market. Three months ago, the troubled automaker posted a forecast of $1 billion, doubling the outlook from a year ago.
This means that Ford Motor Company (NYSE:F) will now stand to make losses three times as much as it had originally imagined. To paint a darker shade of gloom to the already deplorable situation, the company believes that the losses will stretch into next year. Ford also believes that profitability will be restored in mid decade, indicating that the next two to three years will be mired in bearishness.
This announcement comes after the company noted that it would close its Genk, Belgium factory in fiscal 2014. In addition to this shutdown, the company also intends to close its Dagenham tooling and stamping operations, and shut down its Southampton vehicle assembly plant. These three shutdowns are in accordance with the company’s plan of cutting down European production capacity by 18 percent.
Ford Motor Company (NYSE:F) CEO Allan Mulally, who is renowned for the widely documented Ford turnaround in the U.S., noted that the company would pursue restructuring in an aggressive fashion, netting cost saves of $450 to $500 million a year. “We will address the crisis in Europe with a laser focus on new products, a stronger brand, and increased cost efficiency,” he added.
Mulally also noted that the company would work hand in hand with its stakeholders all through the transformation. His remarks were directed towards concerns aroused by the impact that the plant shutdowns would have on the three plants’ employees and their families. “We recognize the impact our actions will have on many employees and their families in Europe, and we will work together with all stakeholders during this necessary transformation of our business,” he noted. According to Ford Motor Company (NYSE:F), a total of around 5700 people work at these three plants.
Ford’s European prospects continue to thin in light of weak sales. The company’s top line has shrunk considerably, as signaled by last year’s 18 million sales. This year, it expects to sell 14 million new automobiles, representing the weakest sales since 1994. As earlier noted, profitability is expected to creep back in mid-decade, despite 67 year old Allan Mulally’s doubled efforts to reverse fortunes in the European market. Allan Mulally has in the past dismissed rumors of his imminent retirement.