Page last updated at 16:52 GMT, Thursday, 24 July 2008 17:52 UK

Carmakers tackle profit problems

Renault Logan on the production line at a factory in Tehran
Renault starting making cars in Iran, but sales have been disappointing

Three of the world's top carmakers have unveiled plans to help their businesses survive as the industry faces huge losses and slumping consumer demand.

Ford, the second-biggest US carmaker, lost $8.7bn (4.3bn) in three months and plans to revamp its vehicle line.

French car manufacturer Renault has said it will cut its European workforce by 5,000, while Germany's Daimler has trimmed its 2008 earnings outlook.

High fuel and raw material prices have all buffeted carmakers' profits.

Car manufacturers such as Ford whose line-up includes bigger models like sports utility vehicles (SUVs) and large trucks are now having to switch to making smaller, less profitable vehicles.

Less thirsty?

On Thursday, Ford surprised the market by reporting a higher-than-expected $8.7bn second-quarter net loss, compared with a net profit of $750m a year earlier.

It has attributed the steep decline to lacklustre sales of its large sports utility vehicles (SUVs) and pick-up trucks, as many consumers look for more efficient models.

In response, Ford will add more smaller vehicles to its line up and transform three large truck and SUV plants to small car manufacturing bases in December.

It will also double its production of four-cylinder engines by 2011 and has decided to delay the launch of what it was touting as a new-and-improved F-150 pick-up truck.

Ford had planned to return to profitability during 2009, but worsening economic conditions and declining sales have forced it to shelve that target.

Voluntary redundancy

Renault said its plan to cut jobs through voluntary redundancies was prompted by the deteriorating economic outlook.

Renault, the sixth-largest car maker in Europe, said it was now scaling back its production targets because of weak sales in Spain, Italy and the UK.

The French car maker had planned to produce 3.3 million vehicles this year but said it would miss that target by 300,000.

As well as weaker sales in Europe, its production in Iran has been lower than expected this year.

Renault started making the Logan model in Iran in March 2007, with 100,000 being sold in the first week of production.

Overall Renault said it was looking to cut its costs by 10% and that it would go ahead with a previously announced increase in car prices to offset a rise in the costs of its raw materials.

Despite the downbeat outlook, the company reported that its worldwide sales rose by 2.3% in the first half of this year.

As a result its half year net profit rose from 1.07bn euros (843m; $1.68bn) to 1.5bn euros.

Missing targets

Germany's Daimler, which makes models such as Mercedes, has also suffered from high raw material and fuel costs.

Although still profitable, the company announced that its future profits would be less than expected.

The company said it now expected earnings of more than 7bn euros in 2008. It had expected earnings of more than 7.7bn euros it made last year.

Its second-quarter earnings fell, dropping 4% to 2.05bn euros, compared to the same period a year earlier.




SEE ALSO
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