Ford’s record $1.2-billion profit in Europe last year won’t likely be obtainable in 2017, as the automaker’s profits will be slashed by the delayed currency impact of the UK’s vote to leave the European Union, Reuters reports.
The UK is an important market for Ford; the company has a 12-percent market share – greater than any other brand – and builds more engines there than any other automaker.
But Ford will no longer benefit from currency hedges which protected it against the British pound’s slump that resulted from the so-called “Brexit” vote, says Ford Europe President Jim Farley. “When Brexit happened we were fully hedged for the first quarter with the stronger pre-Brexit exchange rate,” he said. “As we enter the rest of the year, especially the second half, we now face the full effects of the weaker sterling.”
Meanwhile, the uncertainty regarding possible tariffs on UK-built goods poses an additional threat to Ford’s profitability. Reuters reports that Ford currently produces engines at two UK plants that are shipped out-of-country to be installed in vehicles; many of those vehicles are then shipped back to the UK for sale.
“We’ve all built our businesses on an integrated model between the UK and the EU,” says Mr. Farley. “We would expect both entities to work for a free-trade arrangement like [the one] we have today.” But German Chancellor Angela Merkel says that the EU should not give the UK a generous departure deal that might encourage additional exits from the European Union.