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Stacy94PGT · 01-25-2005, 09:16

Ford exec says Western Europe carmaking at risk

Reuters

BOCHUM, Germany -- The carmaking industry in western Europe is at risk unless it takes steps to boost its international competitiveness, a senior Ford Motor Co executive said on Tuesday.

"The fact of the matter is, these days it is not a very competitive place to do business," Mark Fields, executive vice president of Ford's Premier Automotive Group of luxury brands, told a car sector conference in Germany's industrial heartland.

He said low-cost labor elsewhere and the emerging pool of engineers in places such as China and India made carmakers take a hard look at where to manufacture in future.

Fields said the European Union had made a good start in discussing the impact of regulation on carmakers, but noted that EU rules on how to make cars would add 5,000 euros ($6,524) to the price of an auto within two or three years.

"Unless we as a continent have a very defined industrial framework and industrial policy ... we will lose competitiveness step by step over time. It is not going to happen in a huge leak. It will appear more like a dripping faucet," he said.

"It is a huge issue we must address and we have to do it collectively or we will wake up one day and find the bucket full." Faced with slack consumer demand, currency headwinds, the inroads of Asian rivals and price incentives, European carmakers are already finding it hard to defend profit margins, he said.

"The European automotive industry is simply not profitable in its home market," he said, noting nearly three-quarters of global automotive products are made in the United States.

Ford's Premier Automotive Group includes Volvo, Jaguar, Aston Martin and Land Rover. Jaguar last year cut 1,150 jobs in a bid to stem losses that could last until 2007 or later.

Land Rover cut output by some 15,000 units due to a weak dollar and slack demand but no jobs were cut.

Fields said Volvo was healthy while Land Rover and Aston Martin were about to benefit from investment in new products that were now hitting the market.

He gave no concrete outlook for Jaguar, but said making a profit at the British brand was not a prerequisite for hitting the target of having the company's luxury brands generate a third of Ford's automotive pre-tax earnings by 2006.

"Because we have these four brands we can compensate one brand for the other,"he told reporters. He gave no PAG profit outlook for 2005.

Ford of Europe and PAG lost a combined $626 million before tax in 2004 versus a loss of $936 million in 2003.

Ford of Europe posted a full-year pre-tax profit of $114 million, reversing a pre-tax loss of $1.1 billion in 2003, thanks to higher revenue, cost savings and increased profits from a joint venture in Turkey.

PAG reported a pre-tax 2004 loss of $740 million, a decline from a pre-tax profit of $171 million in 2003, amid currency impact and lower sales volume at Jaguar.