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Ford Retiring Finance Chief Booth Says Loss in Europe May Hit $600 Million

Lewis Booth, retiring April 1 as Ford Motor Co. (F)’s chief financial officer, said the automaker may lose $500 million to $600 million this year in Europe where the financial crisis is exacerbating industrywide overcapacity.

Ford’s pretax loss in Europe in the first quarter may exceed the $190 million the company lost there in the final three months of 2011, Booth told reporters yesterday in an exit interview at Ford’s Dearborn, Michigan, headquarters. Ford still expects companywide 2012 pretax operating profit to equal last year’s $8.8 billion, Booth said.

“We’re going to have a tougher time in Europe than perhaps we anticipated at the beginning of the year,” Booth said. “We think Europe’s much more likely now to be at the bottom end of the scale we talked about, in the range of 14 million” auto sales.

Ford in January forecast industrywide sales of 14 million to 15 million cars and trucks in Europe’s 19 primary countries. A lack of consumer confidence and a stubborn sovereign debt crisis is pushing the annual selling rate below 14 million this month, Booth said.

“We’ll continue to work on actions to improve profitability in Europe because we don’t want to continue to lose money,” Booth said. Ford will reduce the rate of European losses with new models coming this year and by “continuing to work on our cost base,” he said.

Good profit in North America should offset the European losses and provide “decent” results for years to come, Booth said. While noting that Ford’s “fundamentals” may warrant a return to an investment-grade credit rating, Booth said the automaker may not reach that threshold this year.

Europe ‘More Serious’

“We were hoping that when we achieved the competitive settlement we did with the UAW that all the worries that the ratings agencies had would be lifted, but around that time the sovereign debt crisis in Europe became much more serious,” Booth said of the four-year contract the automaker reached with the United Auto Workers in October. “We just have to be patient and do what we’re doing, continue to deliver good, strong results.”

Booth, 63, became Ford’s finance chief in November 2008, as the automaker was completing a year in which it lost a record $14.8 billion and its share price fell as low as $1.26. The shrinking market in Europe will force automakers to finally cut factory capacity there, said Booth, who ran Ford’s European operations before taking the finance role.

“The European overcapacity is well understood,” Booth said. “We have to see some actions in Europe to reduce capacity.”

Booth’s Record

The executive in 2009 engineered Ford’s largest debt restructuring, led the sale of its Volvo luxury line to China’s Zhejiang Geely Holding Group Co. in 2010 and spearheaded restoration of Ford’s dividend after a 5-year-suspension. The automaker’s shares closed yesterday at $12.38, it made $20.2 billion last year, boosted by a one-time gain of $12.4 billion, and it’s within one level of an investment-grade credit rating.

Before becoming CFO, Booth spent 12 years running Ford’s regional carmaking operations, first in South Africa, then in Asia and finally in Europe. He engineered a turnaround at Hiroshima, Japan-based Mazda Motor Corp. (7261), at the time controlled by Ford, and overhauled the U.S. company’s European car lineup. The son of a Liverpool, England, car dealer, he likes to drive a Transit Connect delivery van with racing stripes.

“He literally knows how the entire Ford world works more than any executive we have in the company,” Executive Chairman Bill Ford said in a 2009 interview.

Ford, which has enjoyed a “fruitful” diesel-engine alliance with PSA Peugeot Citroen, is studying the alliance that the Paris-based automaker announced yesterday with General Motors Co. (GM) Detroit-based GM is buying a 7 percent stake in Peugeot, and the two companies will cooperate on purchasing and product development, ultimately generating $2 billion in annual savings, the companies said.

“Just putting two companies together doesn’t solve a capacity issue,” Booth said. “So something is going to have to happen.”

To contact the reporter on this story: Keith Naughton in Dearborn, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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