Ford ups full-year forecast after second-quarter earnings beat
Automaker credits sales in North America, lower tax rate for $2 billion profit
Ford Motor said Wednesday it earned a profit of $2 billion during the second quarter, up 3.7% from the same period last year, as the company’s North American region bolstered the bottom line and a lower tax rate also helped.
The Dearborn, Mich.-based automaker’s earnings increased slightly even as U.S. industry vehicle sales start to decline after seven years of consecutive growth.
“This quarter shows the underlying health of our company,” Jim Hackett, who was named CEO in May, said in a statement.
A lower-than-expected tax rate lifted the company during the period, Ford Chief Financial Officer Bob Shanks said.
Ford’s effective global tax rate during the second quarter was 10%, much lower than the 30% it had projected for the year. Shanks said Ford’s tax rate was lower because of a change in how the company records some of its prior losses on assets from overseas operations.
Ford said it earned a pretax profit of $2.2 billion in North America during the second quarter, down about $500 million from the same period last year.
North America was the only region where Ford reported a big profit. The company reported a pretax profit of $88 million in Europe and $143 million in the Asia Pacific region but said it had a pretax loss of $185 million in South America and $53 million in the Middle East and Africa.
Ford was widely expected to lower its financial outlook for the year because of declining industry sales in the U.S. and rising incentives. Instead, Ford changed the way it calculates expected profits and slightly increased its outlook.
Previously, Ford said it expect- ed to earn a pretax profit of about $9 billion for the year. Shanks also said the company expects full-year profits to be in the range of $1.65 to $1.85 a share. If Ford finishes the year at the top end of that range, it would be just below a previously forecast $9 billion in pretax profit.
Hackett, since being named CEO, has been working on a plan to further improve the company’s operations. In May, Ford said it planned to cut 10% of its salaried workforce in North America and Asia, or about 1,400 employees.
The Detroit Free Press first reported in June that Hackett was looking for ways to improve revenue growth, improve how the company operates and boost innovation. He is also reviewing how Ford invests its money.
“The entire team is focused on improving the fitness of the business and smartly deploying our capital to improve both the top and bottom lines in the quarters ahead,” Hackett said in a statement Wednesday.
Shanks said results of that review would be announced later this year. “The company is going through a very intensive review of strategy actions,” he said. “I think we are all energized and excited about what we are finding.”
Ford’s stock has dropped from about $13.86 a year ago to close at $11.06 on Wednesday.
“This quarter shows the underlying health of our company.” Ford CEO Jim Hackett