| DEARBORN, Mich.
DEARBORN, Mich. Jan 28 Ford Motor Co on
Tuesday joined a growing number of multinational companies
expressing concern that economic turmoil in Venezuela and
Argentina could spell trouble for 2014 profits.
High inflation in Argentina and Venezuela, along with
concern about how the two countries' governments will try to
steady their economies has Ford rethinking its annual forecasts
for South America.
Consumer prices jumped more than 50 percent last year in
Venezuela and private analysts say inflation reached 25 percent
in 2013 in Argentina, fueled by weakening currencies in both
countries that have rattled global financial markets.
Ford's financial outlook first presented six weeks ago
called for the company to repeat 2013's performance in South
America, when it lost $34 million before taxes, compared with a
profit of $213 million in 2012. Ford's fourth-quarter losses in
South America ballooned to $126 million.
"Since December, we're more concerned," about company
performance in South America, Ford Chief Financial Officer Bob
Shanks told reporters on Tuesday as the company reported an
overall annual pretax profit of $8.57 billion.
Shanks said the company is poised to respond in "real time"
to the changing economic landscape in both Venezuela and
"I think that is an area that we will continue to watch very
closely," he said. Ford will likely have plenty of company.
General Motors Co newly installed Chief Financial
Officer Chuck Stevens recently said that GM's South American
operations had a second straight profitable year in 2013, but
that continued volatility in Argentina and Venezuela present
financial risk. More details may emerge with GM reports earnings
Beyond the auto industry, U.S. consumer products companies
from Colgate-Palmolive to Clorox may also take a hit on the
worsening crisis, in which the Argentine government's currency
controls, by limiting access to dollars, has led a mad scramble
for the U.S. currency on the black market.
The exchange rate on the black market is nearly twice the
official exchange rate, said Guido Vildozo, IHS Automotive
analyst based in Massachusetts. This led to people selling
dollars on the black market and then buying cars at the official
exchange rate, "an investment in a durable good that will
maintain its value even if currency inflation continues," said
This led to a short-term gain for Ford and other automakers
in the Argentine market last year, but Shanks said that the
company hopes that the government institutes longer-term changes
that while biting into new vehicle sales will make more sense
for consumers and the companies that sell to them.
Last Friday, the day after the Argentine peso had its
hardest drop against the U.S. dollar in a dozen years and in the
face of an expected 30 percent hike in consumer prices in 2014,
Buenos Aires said it would relax currency controls it had long
defended as essential.
The situation is even worse in the smaller market of
Venezuela, where Shanks told reporters on Tuesday, "the
government is trying manage every aspect of the economy."
"You know that just doesn't work very effectively," he
New vehicles sales in Argentina by all manufacturers were
about 900,000 vehicles last year, compared with 100,000 vehicles
Shanks said a lack of access to foreign currency in
Venezuela has caused Ford to cut auto output there "because we
simply can't get the currencies that we need in order to pay for
the parts that we need to bring in for production."
Last week, Venezuelan President Nicolas Maduro revamped
11-year-old currency controls under pressure to fix economic
ills ranging from the highest inflation rate in the Americas to
shortages of bread and milk.
However, Venezuela's benchmark bonds fell to two-year lows
when investors said the moves did not go far enough to correct
policies that critics say have led last year's inflation rate of
FORD NOT ALONE
Colgate-Palmolive Co derives more than 80 percent of
its business outside of its North American base, including 50
percent from faster-growing emerging markets, and Latin America
accounts for nearly 30 percent of Colgate's sales.
Last year, Colgate-Palmolive said it incurred a one-time
aftertax loss of about $120 million to adjust its balance sheet
in Venezuela, which Morningstar said hit earning by 13 cents per
Colgate was joined by Avon Products Inc and Clorox
Co last year in having to slash prices for its consumer
goods sold in Venezuela after the country's bolivar was