Ford expects to lose $300 million in South America for the quarter ending Sunday because of currency devaluation in Venezuela, but its highly profitable North America business will offset problems overseas.
Joe Hinrichs, Ford president of the Americas, provided the guidance Wednesday to analysts at a Bank of America Merrill Lynch investor conference in New York.
Devalued currencies, inflation and trade restrictions are making the South American market weaker for now, he said.
Ford is also spending money to transform its product lineup in the region. The higher costs are projected to pay off with stronger future sales and lower production costs.
The global lineup will be anchored by the Ranger pickup -- sales of which increased 42% in the first two months of 2013 from a year earlier -- and the new EcoSport crossover (sales up 70% for the year-to-date, according to Hinrichs.) Other key products for the region will be the new Fusion, Focus and Fiesta.
Ford made $213 million in South America last year. In January, management said the region would break even this year as a more profitable product mix would offset trade and currency issues, especially in Venezuela and Argentina. Hinrichs reiterated that Ford should break even before taxes in the region for the full year.
By comparison, Ford's South American pre-tax profits were $900 million in 2011 and $1 billion in 2010.
But the losses pale against the $8.3 billion Ford earned last year in North America. Hinrichs said North American profits should be even higher this year.
After a significant transformation over the past six years, structural costs have been reduced by $8.5 billion from 2005-12. The operating margin in the U.S., Canada and Mexico was 10.4% in 2012 and is projected to be 10% this year.
The automaker expects sales and U.S. market share will increase this year, as material costs will remain flat. The cost of investing in factories and equipment will increase.
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