Ford announces $1.7B quarterly profit, deep cuts to car lineup

April 26, 2018 in News by RBN Staff

 

Source: Detroit Free Press | 

The company that put Americans in cars affirmed Wednesday that those vehicles are going the way of the Model T and it will focus ever more on trucks and SUVs.

Ford, during its announcement Wednesday that it had a first-quarter profit of $1.7 billion, said its traditional car lineup soon will be trimmed to just the Mustang and a new Focus Active crossover that comes out next year.

By 2020, nearly 90% of Ford’s product lineup in North America will be trucks, SUVs and commercial vehicles.

For the first quarter, the Dearborn automaker said it earned 43 cents per share, beating Wall Street analysts’ average expectations by 2 cents per share.

Ford’s revenue worldwide increased 7% to $42 billion for the quarter. The 9% increase in quarterly profit can be almost entirely attributed to a drop in the automaker’s effective tax rate to 9% from 28.6%, Ford officials said.

The automaker’s pretax profit fell 14% from a year ago to $2.2 billion for the quarter.

Ford also unveiled plans to pare an additional $11.5 billion in costs between 2019 and 2022. These reductions would come on top of the $14 billion in cuts that the automaker previously announced in the fall.

The latest planned reductions will come from areas including engineering, materials costs, marketing and sales.

Ford Chief Financial Officer Bob Shanks told reporters it is too early to say whether the additional cuts and “efficiency opportunities” would result in layoffs or staffing reductions.

Ford Motor Co. unveiled its new Ford Focus compact car in China and Europe on Tuesday Detroit Free Press


“We have looked at every single part of the business,” Shanks said. “It’s a little bit of everything, and I don’t think they’re done yet.”

Additionally, Ford said it expects to put $5 billion less into capital expenditures from 2019 to 2022 than it once anticipated.

Shanks said that rising costs for commodities, such as aluminum, steel and copper, were a nearly $500-million drag on Ford’s performance for the quarter. For the year, higher commodity costs are expected to be a $1.5-billion “head wind,” Shanks said.

Ford’s decision to pull back on car production reflects a shift in consumer sentiment that has had an impact across the automotive industry.

The full-size Taurus, midsize Fusion, small Fiesta and wagon-like C-Max will no longer be sold in North America, Ford officials said. Exactly when these models will stop being sold in the market hasn’t been announced.

In 2016, Fiat Chrysler Automobiles announced it would end production of the Dodge Dart and Chrysler 200 to focus even more on SUV and trucks. The company, which does still produce some car models, shuffled production and preserved factory jobs. It is seeing sales grow at its Jeep brand, with vehicles such as the Compass SUV and a new Wrangler.

Michelle Krebs, executive analyst at AutoTrader.com, said Ford’s move is no shock.

“Ford’s announcement to pretty much get out of the car business … comes as no surprise. Ford’s car sales have been dismal for the past couple of years, and there’s no end in sight to the decline of traditional cars,” Krebs said.

Dave Sullivan, manager of product analysis for AutoPacific, Inc., called the move bold but also not surprising.

“This might be the boldest move Ford has made in many years as they pin their hopes on future products that no one has seen,” he said. “Obviously, this has done well for brands such as Subaru. The competition isn’t standing still and we’ll see more jacked up cars, wagons, and crossovers on the market every few months for the next few years.”

In North America, Ford’s biggest market, the automaker’s pretax profits were down $200 million to $1.9 billion. Shanks said the higher commodity prices were largely to blame.

Europe was the only other region where Ford was profitable — a $149-million pretax profit. Ford reported losses of $149 million in South America, $119 million in the Asia/Pacific region and $54 million in the Middle East and Africa.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.