Ford takes the axe to operations in Russia, but cost-cutting is no solution to its problems

Ford has announced that it will end passenger car production and shut plants at its Sollers joint venture in Russia as part of a restructure to operations there. Dave Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:

“Ford profits have been on a declining path and it should come as no surprise that Ford has taken these steps to rebalance operations and reduce losses in its European division where Russia has long been a drag. A stubbornly fragile Russian economy and a vehicle market that remains way off past peaks and has recently fallen back has not helped.

“But Ford’s troubles in Russia were also indicative of poor decisions on product offerings and pricing, which left it competitively exposed and with declining market share.

“Cost-cutting is one way to react to poor performance, but investors also want to see more flesh on the bone on how it plans to meet the huge auto industry challenges ahead and grow profit in the face of even tougher global trading conditions expected this year. The strategic tie-up with Volkswagen has also underwhelmed in terms of announcements so far.

“Meanwhile, the Ford share price languishes at under $9, the increased shareholder value hoped for under CEO Jim Hackett seemingly as elusive as ever.”  

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