Ford CEO starts turnaround with profit beat, lifted its annual profit forecast
FORD’S new chief executive officer surprised Wall Street with better than expected earnings despite familiar challenges of a slow US auto market and an ageing model lineup.
In its first results since Jim Hackett became CEO in May, Ford delivered second quarter adjusted earnings per share of 56 cents, beating analyst estimates. While the car maker boosted its annual profit forecast, it’s due to a lower-than- expected tax rate.
“The quarter shows the underlying health of our company,” Hackett said in a statement last Wednesday. “But we have opportunity to deliver even more.”
Hackett took over Ford’s top job after the board ousted his predecessor Mark Fields for not acting decisively to reverse a three-year stock slide. Credited with reviving office-furniture maker Steelcase, Hackett has a mandate to both clarify and accelerate Ford’s strategy to take on Silicon Valley in the race to driverless cars.
In the meantime, the auto maker is cutting costs as a dry spell in new model introductions coincides with the US auto market declining for the first time in eight years.
“It’s still going to take a while to see anything in the results” from Hackett’s efforts, said David Whiston, an auto analyst with Morningstar in Chicago. “Regardless of who is CEO, they just don’t have a lot of new vehicles right now. You don’t change that in one or two quarters.”
Ford forecast full-year profit in the range of US$ 1.65 to US$ 1.85 per share, adjusted for some items. That’s up from about US$ 1.58 per share projected previously, Chief Financial Officer Bob Shanks told reporters at the company’s headquarters in Dearborn, Michigan.
The improved outlook comes from an expected tax rate of 15 per cent this year, half of what the company previously anticipated. Ford lowered its rate by utilising tax credits it had accumulated in overseas markets where it had suffered losses, Shanks said. Next year, Ford’s tax rate is likely to return to 30 per cent, he said.
Ford shares slipped 1.2 per cent to US$ 11.14 as of 8.27am in New York, before the start of regular trading. The stock dropped 7.1 per cent this year through Tuesday’s close, trailing the benchmark S& P 500 Index’s gain.
Hackett already moved to staunch the bleeding from its Focus compact, with its US sales down 20 per cent this year as buyers shun traditional cars in favour of sport utility vehicles.
Hackett scrapped a controversial plan to move Focus production from Michigan to Mexico and instead will build the car in an existing factory in China, where labor costs are cheaper. Ford expects to save US$ 500 million as a result of the move.
Ford also has canceled plans to sell the next- generation Focus in South America, a market where the company has posted losses amid economic instability, Shanks said. — WP-Bloomberg