Tyre recall pushes Ford into first loss in nine years
20 Jul 2001
Due to the unprecedented costs associated with the recall of Firestone tyres on its Explorer vehicles, the world’s second biggest automobile company, Ford Motor Company, reported a $551 million after-tax loss in the second quarter of the current fiscal. This deficit would be the first time in nine years that the automobile giant was reporting a loss.
In addition to the recall of tyres, higher marketing expenditure that was called for by increased competition in the core North American markets also pulled the bottom line down.
This loss is compared with a $2.53 billion profit in the same period a year ago.
While the markets were not surprised, since the automaker had already warned that it would be taking a $2.1 billion after-tax charge to cover the recall costs, even so, Ford shares - depressed by the jump in marketing expenditures - fell 35 cents to $25.37.
Ford’s market share in the North American market has fallen 1.7 percentage points and the company attributes this drop to the strong competition from Asian automakers who have, according to the company, taken advantage of the yen’s weakness.
However, in sharp contrast, the company’s European operations continued to show signs of recovery making $141 million in profit in the second quarter. The "rest of the world" made a profit of $47 million, down from $135 million a year ago, mainly due to the problems at Ford''s Mazda affiliate.
According to the company’s outgoing chief financial officer, the financial outlook as "reasonably robust".
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