U.S. News

Ford Expects to Earn Profit in Europe in 2007


Struggling auto maker Ford Motor expects its Ford Europe and Premier Automotive Group divisions to report a profit in 2007, according to a Ford executive, indicating its turnaround at those businesses may be gaining traction.

Lewis Booth, the head of Ford's European operations, also said that the sale of all or a part of luxury division Aston Martin "has not reached conclusion" and that a sale would conclude sometime this year.

Speculation over the sale of Aston Martin, made famous in part by James Bond movies, has been rampant. The Times of London reported in its Saturday edition that Ford is in exclusive talks with Prodrive, a motor racing company, over Aston Martin.

Booth, speaking at the Merrill Lynch Global Automotive Conference in Geneva on Monday, said Ford has received a lot of interest from many parties regarding Aston Martin.

He also said Ford's "fundamental business structure" in Europe is improving and indicated the divisions won't be a drag on pretax profits. The comments come as Ford undergoes a major restructuring of its money-losing North American operations.

Ford's Premier Automotive Group _ which includes the Volvo, Land Rover, Jaguar and Aston Martin brands _ has been a weak financial performer for the auto maker and last year posted a pretax loss of $344 million. Warranty costs, unfavorable exchange rates and high raw material costs hurt PAG's performance last year.

But new products and continued cost-cutting are expected to drive a full-year pretax profit for the division.

External factors will continue to have an adverse effect, however, especially if the U.S. dollar remains weak.

Jaguar, Booth said, is not for sale, and said, "if that changes, we'll tell you when we're ready."

Ford Chief Executive Alan Mulally has said the Jaguar unit is not currently for sale, but said he does not rule out eventually reversing that decision. Mulally has been Ford's top executive since September.

Jaguar, in particular, has been a strain on PAG profits in recent years. Much of Jaguar's costs are in British pounds, which is significantly higher in value than the U.S. dollar, while the United States is one of its larger markets.

Ford of Europe, which posted a 2006 pretax profit of $455 million last year, is expected to be profitable again in 2007. The division, which sells Ford-branded vehicles in Europe, has seen growth in new markets, such as Russia, a good response to new products and benefits from past cost-cutting actions.

Dearborn, Mich.-based Ford also indicated in the slides that it's "anticipating" the sale of luxury division Aston Martin. Ford last year put Aston Martin up for sale to raise cash.

Ford is shoring up liquidity as it deals with a major restructuring of its North American operations. Last year, Ford lost a record $12.6 billion as it continued to lose market share in its home U.S. market.

The auto maker is closing plants in the United States and cutting tens of thousands of jobs.