As if making good on its warning back in December about potential volatility in its Venezuelan operations, Ford has announced that it is prepared to take a $350 million charge for the first quarter because of how it values Venezuela’s currency, Bloomberg is reporting.
Instead of the 6.3 bolivars per dollar it was using, Ford is now using an exchange rate of 10.8 bolivars per American dollar, according to a filing submitted by Ford on Wednesday with the U.S. Securities and Exchange Commission. The move follows an announcement in January that the company would be cutting production in the region, due to the currency hardships.
The availability of U.S. dollars “is crimping our ability to pay suppliers,” Mark Fields, Ford’s chief operating officer, said in Detroit earlier this year. “We’ve taken our production down.”
Ford also noted in December that it was assuming a “major” devaluation in the bolivar. “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,” Ford’s Chief Financial Officer Bob Shanks said at the time, according to Bloomberg. “The environment in Venezuela is volatile and increasingly difficult and unpredictable for business.”
Despite the storm in South America — which has been a problematic region for Ford for some time now — things are going swimmingly here at home, where Ford is celebrating its best month of March in eight years. The F-Series pickups sold over 70,000 units, making for the fourth time in seven years that it’s broken that barrier. Pickups are a profit lifeline for Ford, so the strong sales now — and the undoubtably strong sales of the new model later this year — will help to offset the profit shortfall from South America.
Additionally, Europe continues to shape up for Ford, and with a new Focus on the way — Ford’s most popular global model, its global operations are making progress after the significant setbacks from the recession.
Strengthening currencies have been a problem around the world for the automaker — weakening ones, too. In Australia, Ford (along with GM and Toyota) are pulling out their manufacturing assets because the Australian dollar is making it a tough business proposition. Japan, however, is letting the yen slide, giving Ford and other domestic manufacturers headaches back at home.