South America has proven a tough market for Ford Motor Company to make work, losing the automaker a total of around $4.2 billion since 2013. The last year in which Ford was profitable in the market, 2012, only saw it rake in $213 million before taxes – small potatoes next to the $1.7 billion in adjusted EBIT (Earnings Before Interest & Tax) it raked in worldwide in the second quarter of this year.
As a result, Bloomberg reports, Ford Motor Company may be pondering an exit from the South American market, and it’s claimed that the automaker has already started shopping its South American business around to rival automakers Volkswagen Group and Fiat Chrysler Automobiles.
Ford spokesperson characterized Bloomberg‘s report as false, writing in an emailed statement that “Ford is not considering an exit from South America.” FCA claims it hasn’t had any conversations with Ford about Latin America, while Volkswagen declined to comment.
However, an exit from South America wouldn’t be surprising for Ford Motor Company, given the cash drain that market represents. In May, CEO Jim Hackett said that “fairly large” changes were in store for Ford’s businesses in Europe and South America as the automaker attempts to curb hundreds of millions in losses, and more recently, during Ford’s last earnings call, CFO Bob Shanks said: “Our business in South America lacks a strong competitive position or profit pillars.”
He continued: “We have not earned an appropriate return on investment over the most recent economic cycle that spans from 2004 to the present. For those reasons, we are moving on a significant redesign of our business model focused on where to play and how to win.”
Bloomberg’s sources confirmed that Ford’s CEO is open to “a range of options” to curb the losses from its older-than-a-century business in South America. The automaker said during last week’s earnings call that global restructuring could cost as much as $11 billion over the next three to five years.