FORD GETTING FIT
New CEO won’t rest on laurels despite ‘strong performance,’
DEARBORN, MICH.— Ford Motor Co. had a better-than-expected second quarter despite lower sales and upheaval in its executive ranks.
Net income rose 4 per cent to $2 billion (U.S.), thanks to a change in the company’s tax rate and a strong performance from its credit arm.
Ford’s new CEO Jim Hackett called it “a solid performance,” but said the company still needs to get much more fit and nimble.
“We know we’re going to be quicker and more purposeful in our decisions about where to play and how to win,” Hackett told analysts and media in his first earnings call since he became Ford’s CEO.
“We’re in an incredibly competitive industry and the competition just doesn’t relax because we’re thinking through a decision.”
Adjusted profits of 56 cents per share easily surpassed Wall Street expectations of 43 cents, according to analysts polled by FactSet. Onetime items included a $248-million charge as the company shifted production of the Ford Focus small car from Mexico to China.
Ford’s automotive revenue of $37 billion was in line with Wall Street’s expectations. Total revenue rose 1 per cent to $39.85 billion.
The elevated performance in the second quarter was due mostly to a lowering of the company’s corporate tax rate, from 30 per cent down to 10 per cent, chief financial officer Bob Shanks acknowledged.
Ford has put some overseas losses back on its books in anticipation of changes in the U.S. corporate tax code, Shanks said.
The company expects to have a 15-per-cent rate this year, but that will return to 30 per cent next year.
Ford’s full-year guidance shifted upward due to the tax change. Ford expects adjusted earnings of $1.65 to $1.85 for the full year, up from its previous guidance of $1.58 per share, Shanks said.
But analysts pointed out that with the lower tax rate, it likely means a lower full-year net income than the $9 billion Ford previously guided.
Barclay’s analyst Brian Johnson said Ford may be lowering the bar to make it easier to meet expectations. But the move wasn’t greeted well by investors.
Ford shares dropped 2 per cent to $11.06 in afternoon trading.
Overall sales fell 3 per cent to 1.65 million vehicles. Much of that decrease was due to lower sales of the Fiesta in Europe as the company prepares to launch a new Fiesta, Shanks said.
Ford earned $2.2 billion in North America, its biggest market. That was down 19 per cent from the AprilJune period a year ago as Ford spent more on incentives and commodities, including steel.
The company broke even in South America, Europe, the Middle East and Asia.
It was the best quarter since 2011for Ford Credit, which is seeing stron- ger-than-expected auction values for Ford’s off-lease vehicles, Shanks said. Ford Credit’s revenue rose 7 per cent to $2.7 billion in the quarter.