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Ford says Venezuela charge to reduce fourth-quarter profit by $700 mln

A worker at the Ford Rouge Center in Dearborn, Michigan.
Rebecca Cook | Reuters
A worker at the Ford Rouge Center in Dearborn, Michigan.

Ford Motors on Friday said a charge related to its Venezuelan operations will reduce the company's fourth-quarter profit by about $700 million.

Ford said its estimate for 2014 full-year pretax profit was unchanged at about $6 billion, excluding special items.

Ford changed the method of accounting for its Venezuela operations on Dec. 31, which it said will result in a one-time pre-tax special item charge of $800 million for the fourth quarter.

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The No. 2 U.S. automaker has been operating in Venezuela for 53 years. The accounting change "does not have an impact on Ford's Venezuelan operations or ownership," Ford said in a statement.

After Ford issues its fourth-quarter financial results next Thursday, it will not include its Venezuelan operating results. Instead, the company says it "will record cash and recognize income to the extent the company is paid for parts sold to its Venezuelan operations or the company receives dividends from them."

The $800 million special item charge for the fourth quarter is an accounting change and does not include any losses in Venezuela which will be reported as part of the company's South American business next Thursday, a Ford spokeswoman said.

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Ford said that Venezuela's exchange control regulations and other recent regulatory changes in the country "have constrained parts availability and are now significantly limiting" its operations there.

Ford said its Venezuela operations had a cash balance at the end of 2014 of about $500 million.

Buckingham Research analyst Joseph Amaturo said in a note that Ford's announcement will be viewed negatively.

On Friday, Ford's stock was unchanged at $15.03 on the New York Stock Exchange. (Get the latest quote here.)

Venezuela President Nicolas Maduro on Wednesday shook up complex currency controls in the socialist-run country, where dollars are sold on the black market for about 180 bolivars to the U.S. dollar instead of the country's three-tiered exchange rate system that has ranged from 6.3 bolivars to about 50 bolivars to the dollar.

Auto sales industrywide in Venezuela fell 76 percent in 2014 to 23,707 vehicles, and the country's auto production fell 72.5 percent to 19,759 vehicles, a national automakers organization said last week.

Last January, when Ford reported a $8.57 billion pre-tax profit for 2013, the company warned that its operations in Venezuela could hurt 2014 profit.