Mar 3, 2015 11:56 AM

Russia troubles hinder Ford, GM efforts to recover in Europe

The Associated Press

GENEVA (AP) Russia's sinking economy is putting up a major hurdle for Ford Motor Co. and General Motors as the U.S. automakers fight to return to profitability in Europe after years of losses.

Karl-Thomas Neumann, CEO of GM's Adam Opel GmbH subsidiary, said at the Geneva International Motor Show that the Russian market "is basically collapsing." He said sales there could fall this year to as low as 1.5 million. Last year, they were 2.5 million.

Neumann said Russia's downturn was "working in the wrong way" as the company tries to meet a goal of breaking even this year. He added that the company wasn't giving up on its goal of returning to profit in Europe in 2016, and that it would work to make earnings in other regions make up for diminished prospects in Russia.

"I am a marathon runner, and you don't give up the race in the middle of the race just because it is raining or your feet hurt," Neumann told reporters at the show.

Ford of Europe head Jim Farley told reporters that Ford "made a lot of progress" in cutting losses in Europe through reducing factory capacity and strengthening the company's brand with new models.

"We see 2015 as a year of financial progress," he said, without putting a date on returning to profit. Ford lost $1.1 billion in Europe on an operating basis for all of last year, though it did make money there in the second quarter.

Russia's economy appears headed for recession after a plunge in the rubles value. Sanctions imposed by the U.S. and European Union over Russia's conflict with Ukraine have weighed on the economy.

The fall in the ruble makes any imported components much more expensive in local terms, adding to the woes caused by the general slowdown in demand. Both Neumann and Farley said that their companies had reducted shifts at the Russian plants. Neumann said that Opel had had to raise prices "40 percent, which is ridiculous, but necessary." Farley said Ford had also raised prices but was less specific.

Norbert Reithofer, the head of luxury carmaker BMW AG, said that his company's sales in Russia fell 17 percent last year. Carmakers at the show said much of the drop in sales came in the last three months of the year.


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