FORD BLAMES BILLION DOLLAR DROP IN EARNINGS ON BREXIT
Fears that car giant may scale back in the UK after saying it ‘will take whatever action needed’
US CAR giant Ford has issued an ominous warning to UK politicians that it will do whatever it takes to protect its profits after blaming Brexit for a near$1billion fall in 2017 earnings.
The firm, which employs 9,000 people in this country, is also expecting to make a loss in Europe, including the UK, this year. In comments to its shareholders, Ford bemoans the state of the UK car market – highlighting falling economic confidence since the EU referendum – and lays bare its fears of long-term damage from Brexit.
Profits at the company’s European operations plummeted by $971 million (£760 million) in 2017. Ford’s bosses attribute $600million of the dive to the fall in the value of the pound since the Brexit referendum.
Ford’s alarming comments have been published in its UK annual report, which was filed at Companies House last week. The UK accounts show a modest rise in both revenues and profits. However, these figures cannot be read in isolation because Ford books its growing European commercial vehicle sales in the UK, while its passenger car division – which is performing less well and has been harder hit by Brexit – reports in Germany.
Ford warned it is prepared to ‘take whatever action is needed’ to keep its European business profitable. This is likely to be seen as a thinly veiled warning that it may scale back its operations in the UK – or quit altogether.
Fiat Chrysler Automobiles and Tata Motors, which owns Britain’s Jaguar Land Rover, have also raised Brexit fears in recent filings to investors in the US.
Car companies are worried that Brexit will herald an end to the current ‘frictionless trade’ enjoyed between the UK and EU. This would threaten their ability to import and export car components – as well as the vehicles themselves – quickly and cheaply without having to pay tariffs or undergo time-consuming checks at borders.
Ford is preparing for further declines in the value of sterling in the short run. And the company said it would expect the combination of a weak pound and less favourable conditions in the motor manufacturing industry to ‘have an adverse impact’ on its operations in the long term.
While it increased the number of cars sold across Europe – from 1.53million in 2015 to 1.58million last year – in the UK they are down from 447,000 vehicles to 418,000. Over the same period, UK revenues – reported in Ford’s global accounts – have fallen 16 per cent to $9.6billion.
This contrasts with Germany, where revenues are up 5 per cent to $7.3 billion. Across Ford’s European business as a whole, profits crashed to $234million last year after hitting a record $1.2billion in 2016. The weaker pound means sales made in sterling are worth less when turned into dollars.
Ford said another factor in the downturn is ‘growing anti-diesel sentiment’ across Europe.
The company said it wants a stable trading environment so it can ‘provide a more secure future’ for its 9,000 direct employees in Britain. In a note to US investors last week, Fiat Chrysler lamented ‘significant uncertainty’ about the UK’s future relationship with the EU.
And in an interview in The Mail on Sunday today, Mike Flewitt, chief executive of McLaren Automotive and a former boss at Ford in Europe, dismisses the suggestion that big car makers are exaggerating their anxieties as part of ‘Project Fear’.
He insists their fears are well-founded and says he feels sympathy for overseas car makers which have invested millions in the UK. Tata Motors this month said that ‘weaker economic performance and continued uncertainty over Brexit is impacting growth in the UK’.
Separately, in documents lodged with US regulators, it said a decline in trade between the UK and EU ‘could have a detrimental impact on the level of investment in United Kingdom companies, including our Jaguar Land Rover business’.
Jaguar Land Rover’s boss Ralf Speth said last month that a socalled hard Brexit could cost his company £1.2billion a year in trade tariffs and make it unprofitable to remain in the UK.