Ford Motor cuts full-year earnings forecast

Third-quarter net profit disappoints

DEARBORN, MICHIGAN: Ford Motor Co on Wednesday cut its forecast for operating profit for the year after a disappointing third quarter that chief executive Jim Hackett blamed on higher warranty costs, bigger discounts and weaker-than-expected performance in China.

In a conference call with analysts,

Hackett said Ford “experienced more headwinds” than expected in the quarter.

“As a result, we will not grow adjusted EBIT this year as we intended,” he said, referring to earnings before interest and taxes.

The disappointing financial results are a setback for Hackett, the former CEO of office furniture maker Steelcase, who took over Ford in May 2017 after the abrupt ouster of Ford veteran Mark Fields.

For two years, Hackett has been asking investors to be patient with a methodical restructuring that has made progress, including a wide-ranging alliance on electric vehicles with

Volkswagen AG and the sale of moneylosing operations in India to a venture controlled by Indian automaker Mahindra & Mahindra Limited.

But by Ford’s own reckoning, most of the restructuring work has yet to be done. It has booked only $3.3 billion of the projected $11 billion in charges it previously said it would take for the global restructuring, up from $2.2 billion at the end of the second quarter.

The company also suffered a bumpy introduction of the redesigned Ford Explorer and all-new Lincoln Aviator in the quarter, said Joe Hinrichs, Ford’s president of automotive.

“We were disappointed in the overall performance,” he told analysts, referring to the uneven vehicle launch and production ramp-up at an aging Chicago assembly plant.

“We took on too much,” said Hinrichs, citing the difficulty of launching the Explorer and Aviator simultaneously while it was breaking in a new assembly line at the 95-year-old Chicago plant. “We have plenty of inventory now at dealers.”

The third quarter included $1.5 billion in costs for the company’s global restructuring, $800 million of which was related to the formation of a joint venture in India with Mahindra.

Ford’s ongoing restructuring includes cutting costs and overhauling its product line-up in key global markets like

China and Europe.

The No. 2 US automaker still faces the prospect of negotiating a new four-year labour agreement with the United Auto Workers following the union’s more than month-long strike against General Motors Co, which cost GM about $2 billion according to analysts.

Ford reported a third-quarter net profit of $425 million, or 11 cents a share, compared with $991 million, or 25 cents a share, a year earlier.

Excluding one-time charges, Ford earned 34 cents a share, above the 26 cents analysts had expected according to IBES data from Refinitiv.

Revenue in the quarter fell 2% to $37 billion, above the $33.98 billion expected.

Virtually all of Ford’s third-quarter pretax profit came from North America — its most lucrative market — where highly profitable pickup trucks drive margins for the Dearborn, Michiganbased automaker and its Detroit rivals, GM and Fiat Chrysler Automobiles NV.

Ford said it now expected a full-year adjusted operating profit in the range of $6.5 billion to $7 billion, compared with $7 billion last year. In July, it had forecast an increase in the range of $7 billion to $7.5 billion.

Ford also said it expected adjusted earnings this year in the range of $1.20 to $1.32 a share. Previously, the high end of its forecast had been $1.35.