Ford Motor CEO Jim Hackett expressed strong commitment to the automaker's European operations even though the fallout from Brexit hit the company's second-half earnings in the region.
Ford of Europe’s pretax profit plunged 80 percent to $88 million in the quarter, the automaker said when announcing quarterly earnings on Wednesday.
Ford said half of the earnings drop was due to effects stemming from the UK's plan to leave the European Union. The effects included lower market volumes, a deterioration in pricing and a weaker pound. Launch costs for the new Fiesta subcompact also hit profits, the company said.
Ford rival General Motors is selling its money-losing Opel and Vauxhall brands to France's PSA Group but Hackett said his company will remain in Europe.
"I'm bullish on [Europe] but we have got to address the issues that come from Brexit," he said on an earnings call in his most extensive comments on the subject since becoming Ford CEO in late May.
Finance Chief Bob Shanks said: "We still feel a lot of excitement about Europe. We are very committed to Europe and we think we can get the appropriate returns." He said Europe would not offer Ford the same kind of returns as in the U.S. for structural reasons.
Shanks said Ford is working to improve its European business in response to the Brexit "curveball."
Ford of Europe's operating margin was 1.2 percent in the second quarter, down 4.6 percentage points. Its margin in North America was 9 percent.
Ford on Wednesday reported second-quarter net income of $2.04 billion, up 3.7 percent. Its pretax profits fell 16 percent to $2.51 billion thanks to higher steel costs, an unfavorable foreign-currency exchange rate and other factors.
Ford said Europe will remain profitable this year although below 2016 levels. A continued improvement in the Russian market will help earnings, it said.
The company reiterated its forecast that costs associated with the Brexit decision and the subsequent fall in the value of the pound will impact earnings by $600 million this year.