SCRAPPED METAL

Trims car portfolio to just two models

Ford Motor outlines a plan to cut costs and boost profit margins, including dropping some sedan models.

DETROIT: Ford Motor Co on Wednesday outlined a plan to cut costs and boost profit margins at a faster pace than previously announced, which includes dropping traditional sedan models in North America that have become increasingly unpopular with consumers.

The No. 2 US automaker said it planned to cut $25.5 billion in costs by 2022, up from $14 billion it announced last autumn.

“The company is undergoing a profound refocus of its operations and may exit unprofitable businesses,’’ Ford chief executive Jim Hackett told investors.

“We’ll restructure as necessary, and we’ll be decisive,” he said. “We’re going to feed the healthy part of our business,” and dispose of marginal operations, Hackett added.

Ford said it expected pre-tax profit margins of 8% globally and 10% in North America by 2020, ahead of a previous target of 2022.

Responding to a shift in consumer demand to SUVs and pickup trucks, Ford said it planned to trim its North American car portfolio to just two models: the sporty Mustang, which debuted 50 years ago this month, and a new compact crossover called Focus Active starting in 2019.

“Ford will not invest in next generations of traditional Ford sedans for North America, including the mid-sized Fusion and full-sized Taurus,’’ the company said.

The automaker has been under pressure from Wall Street investors to improve its product line-up and lift flagging profit margins. In 2017, the company’s pre-tax profit fell to $8.4 billion from $10.3 billion.

In March, Ford executives unveiled ambitious plans to shift the struggling automaker’s product portfolio from passenger cars to SUVs, add more hybrid and pure electric vehicles, and reduce development and manufacturing costs — aimed at boosting profits and the automaker’s share price.

Speaking to reporters on Wednesday as the company reported first-quarter results, chief financial officer Bob Shanks said “we have looked at every single part of the business ... We are driven to turn this business around.”

Ford reported a better-than-expected first-quarter profit, with a 7% increase in revenue and a lower effective tax rate offsetting a jump in costs.

The company reported a first-quarter net profit of $1.74 billion, or 43 cents per share, up from $1.6 billion, or 40 cents per share, a year earlier. Analysts had on average expected earnings per share of 41 cents.

Despite the higher profit, Ford’s adjusted pre-tax profit margin fell to 5.2% from 6.4% in the same quarter in 2017.

CFO Shanks said the company expected that commodity costs would represent a $1.5 billion “headwind” in 2018, $500 million of which came in the first quarter.

The lion’s share of the automaker’s quarterly profit was driven by high-margin pickup trucks and SUVs in North America. Europe was the only other region to turn a profit for Ford.

The company’s loss in its Asia-Pacific region was driven by slumping sales in China, where Ford has just begun to introduce new models.

“The Lincoln brand is still losing money in China, where it launched in 2015, but now plans to begin local production there in 2020,’’ Shanks said.

“Ford plans to build a new product at its Hermosillo plant in Mexico when it quits production of the Fusion sedan, and will also build a new battery electric vehicle in the country,’’ Joe Hinrichs, president of global operations, said.