Dearborn, Michigan-based automaker Ford Motor Company (NYSE:F) will kick start car sales in recession hit Venezuela after reaching an agreement with the country’s government. The Latin America oil producer is struggling with one of the highest levels of recession in the recent times attributed to low oil sales that has resulted in dollar drought.
Production Restart
Ford Motor Company (NYSE:F) also plans to restart production in the country after the deal, having brought a total of 316 vehicles to market last month. Down from record highs of 3,000 in April of 2007. The move to initiate car sales in the country in dollars comes on the heels of the Venezuelan currency shedding more than 76% in value in the black market over the past year.
The move to accept dollars could lead to a complete overhaul of using bolivars in the entire sector. Ford Motor Company (NYSE:F) is not the only company that has stopped accepting the local currency as a means of finalizing transactions. American Airlines stopped accepting local currency for ticket purchases as one of the measures of shielding itself from currency headwinds on earnings.
Declined Earnings
Most companies with strong operations outside the US continue to feel the significant impact of a stronger dollar, which often results in reduced earnings when converting earnings from abroad to dollars. Clorox feeling the full impacts of a stronger dollar against the Venezuelan currency opted to pull out, altogether from the country.
Head of the Ford Motor Company (NYSE:F) de Venezuela union Gilberto Troya notes that customers will have to pay in dollars when they want to import car parts that will be assembled at the Valencia plant. However, there are still some cars that will be sold in Bolivars including the Ford Fiesta.
Production had been halted in Venezuela as the dollar drought made it extremely impossible to import parts, the automaker having incurred a one-time pretax charge of $800 million on operations early in the year.
