Ford Motor Co., the second-largest U.S. automaker, is reducing production in Venezuela as the South American country faces a shortage of hard currency.
The availability of U.S. dollars “is crimping our ability to pay suppliers,” Chief Operating Officer Mark Fields said yesterday in Detroit. “We’ve taken our production down.”
Output fell about 75 percent in the fourth quarter last year from the rate Ford was running in the first three quarters of the year, and the company’s assumption for this year is that output will remain near the fourth-quarter level, he said.
Car sales in Venezuela fell 64 percent in December from a year ago to 2,959 units, the Caracas-based Automotive Chamber of Commerce said in a report posted on its website yesterday. Shortages of foreign currency have emptied Venezuelan shops of everything from shaving blades to milk as importers struggle to get dollars and prices rise at the fastest pace in the world with annual inflation of 56 percent.
Venezuela President Nicolas Maduro said Dec. 2 he’d sign legislation to regulate the price of new and used cars in the country’s latest measure to combat record inflation.
The law will allow the government to set car prices, require manufacturers to provide weekly production figures, ensure that used car prices don’t exceed new car costs and provide licenses to individuals to import a vehicle using an account in euros or dollars with a state bank, Maduro said in a national address.
Maduro used troops to enforce price cuts in electronic stores and temporarily seized an Irish-owned packaging company in November, saying companies are overcharging consumers.
He has also pledged to lower prices for cars and commercial leases, warning business owners that he is “going all the way” after lawmakers gave him the power to rule by decree for one year.
The bolivar’s 73 percent decline against the dollar on the black market in 2013 to about 65 per dollar is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on Maduro’s government to devalue.
The government will weaken the official exchange rate of 6.3 bolivars per dollar before the end of March for the third time since 2009, according to all 14 analysts in a Bloomberg survey.
“Recent government actions in Venezuela, including price controls and a very limited and uneven supply of foreign currency to support production, have affected production adversely as well as the business and overall results in the region,” Bob Shanks, Ford’s Chief Executive Officer, said last month. “The environment in Venezuela is volatile and increasingly difficult and unpredictable for business.”
For 2014 planning purposes, Ford is assuming a “major” devaluation will take place early this year from 6.3 to 12 bolivars per dollar, he said, adding that the company is struggling to obtain foreign currency to pay for imported components used in vehicles assembled in the country.
“Foreign currency access is controlled by the government and supply has been uneven and unpredictable for some time, and recently availability has been very limited,” he said.