Ford Motor Co. is modifying its internal five-year business plan to take into account the marked deterioration in the European economy over the last year. According to Bob Shanks, CFO, the company is in the process of preparing a new plan that keeps track on the much less favourable external environment as well as new realities.
Shanks declined to describe the specific changes to Ford’s strategy because the updates are confidential. The next update will be presented to top executives in mid-July.
Ford will continue to tweak its five-year outlook over the course of the year. In December, Ford will present the plan to its board of directors “to get confirmation,” Shanks added.
Europe’s debt crisis has depressed demand for new vehicles in the 19 markets Ford tracks in the region, where automakers had already been contending with over capacity, paper-thin margins and tough price competition.
Ford expects to lose between US$500 million and US$600 million in Europe this year.
Concerns about the health of Spain’s banks and the prospect of Greece exiting the euro zone after an election on June 17 have unsettled global markets. The U.S. economic recovery increasingly appears at risk and growth in major emerging economies such as Brazil, India and China has slowed sharply.
Federal Reserve Chairman Ben Bernanke said the U.S. Central Bank was gauging the “significant risks” to the U.S. recovery from the debt crisis.
“Clearly in Europe, if you go back and look a year ago we didn’t [envision] the type of environment that it looks like we’re going to be living in for a while,” Shanks said.
Ford — helped by deep cost reductions, staff cuts, plant closings, new models and the recovery in U.S. industry sales — has produced 12 consecutive profitable quarters through the first three months of 2012.
The automaker earned US$29.5 billion in the last three years after racking up $30.1 billion in losses from 2006 through 2008.