(Reuters) - Ford Motor Co (F.N), which reported a better-than-expected second-quarter profit on Wednesday, doubled its forecast for losses in Europe due to a deepening economic crisis that has pushed overall auto sales to their lowest level in nearly 20 years.
The No. 2 U.S. automaker now expects to lose more than $1 billion (645.66 million pounds) in Europe. Earlier this year, Ford forecast an annual loss of between $500 million and $600 million.
The company also predicted it would see a lower full-year operating profit compared with 2011 due to steeper losses in Europe and slowing growth in South America.
“As we look over the next five years and lay out all of our plans for our business, we just think the situation in Europe is going to be challenging,” Chief Financial Officer Bob Shanks told reporters at Ford’s headquarters in Dearborn, Michigan.
The projected losses in Europe were roughly in line with Wall Street estimates. Morgan Stanley predicts that Ford will lose $1.1 billion in Europe this year, more than the losses expected from General Motors Co’s (GM.N) troubled Opel unit.
In Europe, Ford is “facing the situation with urgency,” Shanks said. “We’re all over it.”
Ford relied entirely on North America and its financing arm to turn a profit in the quarter. Ford commanded higher vehicle prices in its home market, boosting operating profit in North America to just over $2 billion.
Ford posted second-quarter net income of $1 billion, or 26 cents per share, down from $2.4 billion, or 59 cents per share, a year ago. Net income fell partly due to an accounting change this year that raised its effective tax rate.
Excluding one-time items, Ford earned 30 cents per share. On average, analysts expected a profit of 28 cents, according to Thomson Reuters I/B/E/S.
Quarterly revenue fell 6.2 percent to $33.3 billion.
Ford lost $404 million in Europe in the second quarter. The company reported a $5 million profit in South America and lost $66 million in Asia.
Worries over Europe have hit Ford’s stock price, which on Tuesday fell to its lowest point since December 2009. Morgan Stanley estimates that Ford’s capacity utilization in Europe is 63 percent, lower than nearly all rivals except for Fiat SpA.
Europe accounted for a little more than one-quarter of Ford’s revenue last year. During the first six months of 2012, industry sales in Europe fell to their lowest level since 1994.
To stem the losses in Europe in the near term, Ford is laying off temporary workers, shortening work days and slowing the rate of assembly lines. Ford also has curtailed its spending on sponsorships and advertising, particularly in countries where sales are lowest, Shanks said.
Reporting By Deepa Seetharaman and Bernie Woodall; editing by Jeffrey Benkoe and Maureen Bavdek