Announcing disappointing results on Thursday, the motor company forecast EU referendum decision could cost the company $1bn over the next two years

This article is more than 4 years old

This article is more than 4 years old

Ford has warned it is considering closing factories and raising prices in the UK and Europe in the wake of Britain’s vote to leave the European Union.

Announcing disappointing results on Thursday, the motor company forecast that the referendum decision could cost the company $1bn over the next two years.



Ford is the largest car brand in the UK and Bob Shanks, Ford’s chief financial officer, warned price rises would be necessary there in order to offset currency fluctuations in the wake of Brexit. The pound has crashed 11% against the dollar since the Brexit vote on 23 June.



Ford announces job cuts in Europe to save £138m a year Read more

Sterling’s devaluation and an expected slowdown in UK car sales would cost Ford $200m this year and another $400m to $500m each year over the next two years, said Shanks.



“We’re going to have to look more at cost,” he said. The company would find a way to “claw that back”.



Shanks’ comments are likely to stoke further fears about the fate of the UK car market in the wake of Brexit. Trade deals will now have to be renegotiated with the rest of Europe leading some analysts to speculate car firms may delay or cancel plans to expand in the UK or quit altogether.



Ford has two remaining manufacturing plants in the UK, at Dagenham and Bridgend. Asked if the group would shut its remaining UK manufacturing operations after Brexit, Shanks said: “Everything is going to be on the table across Europe”.



Ford’s net income fell 9% to $2bn in the second quarter as the company’s China sales weakened and the company failed to match better results from last year. The company has bounced back from near collapse during the recession. Its operating profit for the first half of the year was a record $6.8bn. But as business appears to slow, its success has led to tough comparisons for the company.



Ford, which has previously announced that it expects to make a pretax profit of $10-$11bn this year, acknowledged that this guidance is at risk as China’s economy slows and the ramifications of Brexit become clearer.



“We’re seeing elevated economic risk for the most part globally, and particularly, in what is happening with Brexit,” Shanks said, speaking to reporters at the company’s headquarters.

For the quarter Europe, which has long been a dark spot for Ford, outperformed with sales rising 11%. Pretax profits in Europe almost tripled to $467m thanks in part to stronger sales in Russia.



In North America sales were flat from a year ago and Shanks said that Ford’s record-breaking recovery in the US had plateaued. “We don’t see growth, at least in the near term,” Shanks said. The company lowered its estimates for full-year industry sales in the US and said next year’s sales will be even weaker.



In Asia, Ford recorded its first pretax loss of $8m in more than three years.



Shanks said Ford sold fewer commercial vehicles in China and spent heavily on engineering and warranty costs. The weaker yuan also impacted sales of its luxury Lincoln brand.



Ford’s losses in South America also more than doubled to $265m because of continuing economic issues in the region.

The profit, of 52 cents per share, compared to a profit of 54 cents per share in the April-June period year ago. That missed Wall Street’s expectation of a profit of 60 cents per share, according to analysts polled by FactSet.



Revenue was up 6% to $39.5bn. Automotive revenue of $37bn beat analysts’ expectations. Ford sold 1.7m vehicles during the quarter, which was flat from a year ago.



Ford’s automotive operating margin fell from 8.4% in the second quarter last year to 7.7% this year. Its North American operating margin fell from 12.2% to 11.3%.



Associated Press contributed to this report.