Ford Says Brazil Woes May Slash Its Net

Ford Motor Co. said Monday that its 1990 profit could be cut substantially because of Brazil’s economic problems, which have forced the big auto maker to temporarily shut down its Autolatina operations serving Brazil and Argentina.

“Continuation of the present economic situation in Brazil could have a substantial adverse effect on Ford’s earnings,” the auto maker said in a Securities and Exchange Commission filing.

A Ford spokesman confirmed that problems in Brazil may hurt its 1990 results but declined further comment.

Last year, Ford earned $3.8 billion, or $8.22 a share, down 28% from a year ago, on revenue of $96.1 billion. But its Latin American operations improved in 1989, primarily due to favorable results posted by Autolatina, a joint venture with Volkswagen AG.

Last week Brazil’s Congress approved a dramatic package of economic measures, including price and wage freezes, tax increases and monetary reforms designed to clamp down on inflation, running at nearly 5,000%.

The program has caused a liquidity crisis, forcing Ford to temporarily halt production at Autolatina, Ford said in the filing.

Autolatina, which held 56% of the total car market in Brazil in 1989, also has deferred all non-essential expenditures, Ford said.

Some U.S. auto industry analysts estimate that the Brazilian situation will cost Ford, and rival General Motors Corp., as much as a dollar per share in full-year earnings.

In 1989, GM made $6.33 a share. Chrysler Corp. does not have Brazilian operations and is not expected to be affected by the difficulties.

Analysts were already expecting Ford and GM to report weak first-quarter earnings due to a soft North American car market and reduced production. Ford noted in the filing that first-quarter earnings will be hurt by production cuts. In the first two weeks of January, Ford, General Motors and Chrysler shut down virtually all of their North American plants to reduce bloated inventories of unsold new vehicles.

For this reason, earnings at GM and Chrysler are also expected to be down significantly in the first quarter. Chrysler posted 1989 earnings of $1.55 a share.

Last year, Ford earnings outside the United States were $2.1 billion, down 3% from record earnings in 1988, the company said.