Ford complains rising metals costs cutting into profits

DETROIT: When Ford Motor Co reports its fourth-quarter results, it is expected to fret that rising metals costs have cut into profits, even as rivals say they have the problem under control.

Aluminium prices have risen 20 per cent in the last year and nearly 11 per cent since Dec 11. Steel prices have risen just over 9 per cent in the last year. Ford uses more aluminium in its vehicles than its rivals.

Aluminium is lighter but far more expensive than steel, closing at US$2,229 per tonne on Tuesday, while US steel futures closed at US$677 per ton.

Republican US President Donald Trump’s administration is weighing whether to impose tariffs on imported steel and aluminium, which could push prices even higher.

Ford gave a disappointing earnings estimate for 2017 and 2018 last week, saying the higher costs for steel, aluminium and other metals, as well as currency volatility, could cost the company US$1.6 billion in 2018.

Ford Chief Financial Officer Bob Shanks told analysts at a conference in Detroit last week that while the company benefited from low commodity prices in 2016, rising steel prices were now the main cause of higher costs, followed by aluminium.

Shanks said the carmaker at times relies on foreign currencies as a “natural hedge” for some commodities but those are now going in the opposite direction, so they are not working.

A Ford spokesman added that the carmaker also uses a mix of contracts, hedges and indexed buying.— Reuters