Ford’s 2nd-quar­ter profit up 4%

Tax change helps au­tomaker top Wall Street ex­pec­ta­tions

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - DEE-ANN DURBIN

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 per­cent to $2 bil­lion, thanks to a change in the com­pany’s tax rate and a strong per­for­mance from its credit arm.

Ford’s new Chief Ex­ec­u­tive Of­fi­cer 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. One-time 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 per­cent to $39.85 bil­lion.

The el­e­vated per­for­mance in the sec­ond quar­ter was at­trib­uted mostly to a low­er­ing of the com­pany’s cor­po­rate tax rate, from 30 per­cent to 10 per­cent, 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 per­cent rate this year, but that will re­turn to 30 per­cent next year.

Ford’s full-year guid­ance shifted up­ward be­cause of 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, that likely means a lower full-year net in­come than the $9 bil­lion Ford pre­vi­ously fore­cast.

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 21 cents, or 1.9 per­cent, to close Wed­nes­day at $11.06.

Ford’s slid­ing stock price was one rea­son the com­pany

abruptly re­placed for­mer CEO Mark Fields with Hack­ett in May. Hack­ett was a mem­ber of Ford’s board and had been lead­ing Ford’s mo­bil­ity unit.

Hack­ett said Wed­nes­day that he’s con­fi­dent Ford’s stock per­for­mance will im­prove.

“The share price over time is go­ing to re­flect what we’re go­ing to get done, and we’re go­ing to get a lot done,” he said.

Hack­ett, the for­mer CEO of of­fice fur­ni­ture com­pany Steel­case Inc., is in the midst

of a 100-day re­view of Ford’s op­er­a­tions. He said he has al­ready whit­tled down his list of direct re­ports to eight, from the 19 that Fields had. That team is work­ing on max­i­miz­ing rev­enue on pop­u­lar prod­ucts such as com­mer­cial vans.

Hack­ett also said Ford is con­sid­er­ing ex­it­ing some mar­kets. Gen­eral Mo­tors Co. aban­doned the Euro­pean mar­ket ear­lier this year, but Hack­ett said Ford is com­pet­i­tive in Europe and plans to stay.

Hack­ett also said Ford will prove that it can com­pete in new mo­bil­ity ef­forts such as ride-shar­ing and driver­less ve­hi­cles. He said Ford’s re­cent $1 bil­lion in­vest­ment in Argo AI, an ar­ti­fi­cial in­tel­li­gence startup, will put the com­pany at an “elite level” in terms of its deep learn­ing ca­pa­bil­ity.

Over­all sales fell 3 per­cent to 1.65 mil­lion ve­hi­cles. Much of that de­crease was at­trib­uted 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 per­cent from the April-June 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 2011 for Ford Credit, which is see­ing strongerthan-ex­pected auc­tion val­ues for Ford’s off-lease ve­hi­cles, Shanks said. Ford Credit’s rev­enue rose 7 per­cent to $2.7 bil­lion in the quar­ter.

AP/NG HAN GUAN

A 2017 Ford GT is dis­played at the Auto Shang­hai 2017 show at China’s Na­tional Ex­hi­bi­tion and Con­ven­tion Cen­ter in April. Ford’s sec­ond-quar­ter profit rose 4 per­cent to $2 bil­lion, the com­pany re­ported Wed­nes­day.

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