Ford hit by rising costs

Ford Motor Company has said it has been hit by the rising cost of raw materials and soaring petrol prices.

The second largest carmaker in the US also warned that it no longer expects to return to profitability in North America next year.

Last year, Ford’s North American unit made a $3.5 billion loss and a $45 million loss in the first 3 months of this year.

Furthermore, the carmaker based in Dearborn, Michigan, admitted that it would manufacture 20,000 less vehicles during the second quarter in North America compared to the 690,000 it originally forecasted.

Plans are also underway for redundancies at its Volvo Cars unit and further plans are afoot to put an end to the night shift at its plant in Gothenburg, Sweden, in an attempt to reduce costs.

Ford’s chief executive, Alan Mulally, said unless there is a fairly rapid turnaround in US business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American profitability goal.

A sharp increase in commodity prices, especially steel prices and higher petrol prices that are accelerating consumers’ shift away from large trucks and SUVs together are having a tremendous impact on sales, manufacturing operations and our profitability as the group look to next year, concluded Mr Mulally.

Standard & Poor changed its outlook on Ford debt to ‘negative‘, which means the rating could be reduced and retained its rating of B, five levels below investment grade. Meanwhile, Moody’s Investors Service confirmed its Ford rating at B3, six levels below investment grade.

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