Industry-wide sales in Europe appear to be heading toward 14 million vehicles this year, Booth said. This represents the low end of Ford's annual sales forecast for the region.

"We've seen Europe get off to a tough start," Booth told reporters at Ford's global headquarters in Dearborn, Michigan. "We think Europe is much more likely now to be at the bottom end of the scale."

If that happens, Ford is likely to lose between $500 million and $600 million in the region. A loss of that magnitude would dwarf the $27 million Ford lost in Europe last year.

But Booth said Ford was confident in its overall profit outlook for the year because it expects strong results in North America, where auto sales are on the rise.

"We feel OK about the guidance we've given for the total company," Booth said.

Ford had projected new vehicle sales in Europe to be between 14 million and 15 million this year, down from 15.3 million vehicles in 2011.

Europe's debt crisis has depressed demand for new vehicles in the 19 markets Ford tracks in the region, where automakers had already been contending with overcapacity, paper-thin margins and tough price competition.

On Wednesday, General Motors Co (GM.N) and PSA Peugeot Citroen (PEUP.PA) announced that they formed a global alliance that would allow the two automakers to cut at least $2 billion in costs.

GM is banking on the deal to help it reverse 12 years of losses in Europe, mainly from its Opel brand, totaling more than $12 billion. Peugeot, which relies heavily on the European market, hopes to increase sales in other markets.

The deal between GM and Peugeot "is an indication that people are looking for different solutions," Booth said. But he added that capacity still had to be taken out of Europe.

Ford lost $190 million in the fourth quarter in Europe. Booth said he expected the rate of losses there to be similar or slightly worse in the first quarter of 2012.

After that, he said, Ford expects the rate to improve as it begins to introduce new vehicles to the marketplace.

(Reporting By Deepa Seetharaman; Editing by Phil Berlowitz)

• A Permanent Economic Emergency