Ford Announces $800M 4Q Charge Thanks to Venezuela Inflation: F-150 Truck Cars Add to Slump
In a regulatory filing on Friday, Ford announced it will record an $800 million pretax accounting charge in the fourth quarter after the Detroit-based car company decided to remove all Venezuelan operations from its consolidated earnings. The charge will effectively lower its 2014 fourth-quarter net income results by $700 million. Ford, the No. 2 U.S. automaker, is set to report its quarterly earnings this coming Thursday.
According to the Wall Street Journal, Ford’s 2014 profits were already were down from 2013 because of recall costs and economic conditions in South America and Russia. Another factor further affecting their slump was the lower production of their F-150 pickup after a changeover to an aluminum-body construction.
According to CNBC, 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."
Because of the devaluation of currency in Venezuela, Ford has simply been unable to turn a profit in the Latin American country. Ford has had operations in Venezuela for 53 years. There has been no sign that the situation would change
Excluding special items, Ford said it continues to expect its full-year 2014 pretax profit will be $6 billion.
"Ford plans to record cash and recognize income from the country when it is paid for parts." Ford said it will work with Venezuela in order "to ensure they understand our Venezuelan operations' business needs and potential production opportunities," The Associated Press reports.
Ford shares have slipped 10 cents to $14.93 in midday trading Friday. They have traded in a range of $13.26 to $18.12 in the past year.
According to CNBC, Buckingham Research analyst Joseph Amaturo said in a note Ford's announcement will be viewed negatively.
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