Ford CEO responds to criticism after posting low earnings

Automaker reported profit for 2018 of $1.30 a share as it rolls out new lineup of pickups

SOUTHFIELD, MICH.— Ford Motor Co. boss Jim Hackett took on Wall Street’s criticism that he’s moved too slowly and shared too little about restructuring plans, asking analysts to believe in his “thoughtful” approach while posting profit that fell short of estimates.

“I don’t believe CEO longevity is something that’s attained when companies are left in tatters,” Hackett said Wednesday at a Deutsche Bank auto conference in Detroit. “What causes the thoughtful part is not lack of initiative. It’s not knowing what to do.”

“What I have to do to get your confidence in me and this team is to continue to share proof points that the thoughtfulness is converting” into results, the chief executive officer added. “We have plans to do that.”

Hackett made the appeal after Ford reported preliminary profit for 2018 of $1.30 (U.S.) a share, below analysts’ average projection for $1.32. There’s potential for improvement on revenue, earnings before interest and taxes, and adjusted operating cash flow this year as Ford rolls out new sport utility vehicles and pickups, chief financial officer Bob Shanks said.

Some analysts were disappointed Ford didn’t provide specific forecasts for 2019 earnings.

“Investor patience is likely to be further tested today,” Chris McNally, an analyst at Evercore ISI, wrote to clients. “Ford has basically once again said ‘your guess’ to the financial community with respect to specific financial guidance.”

Ford shares slumped as much as 2.6 per cent to $8.61 in early trading. The stock plunged 39 per cent last year.

Ford is abandoning the traditional sedan market in the U.S. and rolling out a range of SUVs, including the redesigned Explorer, and expanding its line of trucks by reviving the mid-size Ranger. Beyond the restructuring that Morgan Stanley estimated could result in 25,000 job cuts, Hackett is also spending a combined $15 billion in the coming years developing electric and self-driving vehicles.

Hackett, 63, said he thought analysts were being “too casual” about how Ford is revamping a lineup that has strong SUVs, pickups and commercial vehicles. Ford announced an alliance Tuesday with Volkswagen to jointly develop delivery vans and mid-size trucks, and the two companies continue to talk about joining forces on autonomous and electric autos.

“We are moving right now — we have clear direction, focus, a sense of urgency,” Hackett said.

Shanks, the CFO, said Ford’s 2018 results included a noncash pre-tax loss of $877 million in its global pension funds due to declining financial markets late last year. The automaker’s pension funds remain fully funded, he said.

Revenue rose 2 per cent to $160.3 billion last year, according to Ford’s slide show presentation.

Adjusted earnings before interest and taxes fell about 27 per cent to $7 billion, mainly due to Ford’s struggles in China and Europe.

This year, Ford expects tariffs imposed by the U.S. and China to be a $700 million headwind, with the added costs including higher commodity prices.

In North America, Ford has set a “Return to10” objective for its profit margin, which was 7.9 per cent last year.And while Ford doesn’t see a major pullback in U.S. auto sales this year, the company does expect a decline as rising interest rates and higher prices deter some consumers.