Ford and General Motors Brace for Impact in Argentina and Venezuela
The automobile industry is starting to face the largest volatile emerging-market currencies as it increasingly expands into these territories.
Car manufacturers Ford Motors (NYSE: F) and General Motors (NYSE: GM) have finally started to talk about their struggles in South America–specifically Argentina and Venezuela according to Bloomberg Businessweek.
Inflation in Venezuela hit a staggering 56 percent last year, beating every economy in the world, while prices surged 28 percent in Argentina. Ford and GM have manufacturing facilities in both countries but also import quite a few vehicles. Ford was forced to decide between raising prices to compete with inflation and accepting a lower return.
Friday, General Motors said that despite raising prices in South America, its profit from the continent dropped 80 percent to $27 million in the fourth quarter.
Last week, Ford said it had also increased prices, but that didn't prevent it from swinging to a $126 million loss in South America in the recent quarter, from a $145 million gain a year earlier, a whopping $271 million difference.
On top of currency instability, economic growth is slowing down drastically in both countries. That's made for some cautious consumers. Both companies are moving fewer vehicles in the region. General Motors sold 260,000 cars and trucks in South America in the fourth quarter, a seven percent decline, while Ford's sales skidded 10 percent to 104,000.
According to Bloomberg, neither of the two companies is confident that conditions will improve. And neither company is confident conditions will improve.
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