Devalued Peso Turns Ford’s Auto Plans to a ‘Pipe Dream’

From Associated Press

The peso’s fall has turned Ford Motor Co.'s plans to double auto exports to Mexico into a “pipe dream,” the auto maker’s top executive said Monday.

Ford exported 2,000 cars to Mexico in 1993 after the market opened with the signing of the North American Free Trade Agreement. Exports shot up to 25,000 last year.

But the peso has lost nearly half its value since Dec. 20, making items exported to that country more expensive and less attractive for Mexican buyers.

“Our ambition had been to ship on the order of 50,000 in 1995,” Ford Chairman Alex Trotman said. “But that’s a pipe dream now because of the devaluation.


“I expect our volume will drop quite dramatically in vehicles going south,” Trotman told a small group of journalists before he left the World Economic Forum, an annual meeting of government and business leaders.

He said the Mexican currency crisis will shrink the country’s car market “substantially” and “have a significant effect on our business in terms of domestic Mexican sales and profits.”

But Trotman said he did not expect the devaluation to have a great effect on the price of Ford cars that are assembled in Mexico and exported to the United States.

Ford’s plants in Mexico ship some 130,000 Escorts and Tracers a year to the American market. The cars are assembled mostly from components that are sent to Mexico--they contain about 75% American parts.


Also Monday, Trotman said Ford Europe made a profit in 1994 after three consecutive years of losses.

The auto maker’s European unit lost $407 million in 1992 and $647 million in 1993. Propelled by a strong second quarter, Ford Europe earned $377 million over the first nine months of 1994, Trotman said at the World Economic Forum.

Those figures do not include the money-losing operations of British auto maker Jaguar, which Ford acquired in 1990 for $2.5 billion.

Jaguar lost $873 million in 1992 and $371 million in 1993. It lost $122 million for the first half of 1994.