Recalls and lower sales hit Ford’s latest results
But company still on track to make $9bn for full year
Ford Motor’s net income fell 35 per cent to $1.6 billion in the first quarter as it was hit by costly recalls, lower sales and rising prices for steel and other materials. The Michigan-based automaker had warned investors and analysts to expect weaker results in the first quarter. Ford earned a record pretax profit in the first quarter of 2016.
“We’re having one foot in today and one foot in tomorrow,” the Ford chief executive Mark Fields said yesterday.
The company’s chief financial officer, Bob Shanks, said it remains on track for a pre-tax profit of $9bn for the full year. That’s down from $10.4bn in 2016.
Without one-time items, including a gain from the closure of a planned plant in Mexico, Ford earned 39 cents per share, beating forecasts. Wall Street expected earnings of 35 cents per share, according to analysts polled by FactSet. Ford announced two North American product recalls in March that cost the company $295 million. The company recalled more than 230,000 vehicles because of the risk of engine fires and 210,000 vehicles for defective door latches. Those actions were in addition to a recall last fall of 2.4 million vehicles to fix door latches which cost Ford $600m.
Ford’s sales dipped in the first quarter to 1.7 million vehicles. Ford’s North American market share dropped as it sold fewer vehicles to rental fleets, but it said US sales to individual buyers were up. Sales also fell in China. Mr Shanks said Chinese customers rushed to buy vehicles at the end of 2016 before a tax incentive expired, so the market suffered in the first quarter. North America powered Ford’s profits. The company earned a pre-tax profit of $2bn in the region, down 45 per cent from a year ago. Revenue rose slightly as the company sold a higher mix of high-profit trucks and SUVs. Ford said the average price customers paid for a vehicle was up $1,971 in the US in the first quarter, compared to an industry average increase of $506.
Ford eked out smaller profits in Europe and Asia but lost money in South America, the Middle East and Africa.
Ford’s revenue climbed 4 per cent to $39 billion in the first quarter. The company’s automotive revenue was $35.2 billion, beating analysts’ forecast of $34.2 billion.
Ford shares rose 2.1 per cent to $11.84 in pre-market trading.
“It was a tough quarter for China,” Mr Shanks said. “We believe we’re getting back on track in terms of the performance issues that we had in the quarter and we’re expecting much stronger results for the region and for China for the balance of the year.”
Ford likely will find a way to boost profits next year through cost cuts and profits from new models, said David Whiston, an analyst with Morningstar in Chicago. He estimates the company’s shares have a “fair value” of $14. “If the US holds up, management’s expectation of the first quarter being the weakest could certainly turn out to be true,” he said. “But a lot of things can go wrong.”
Ford’s Bob Shanks said the company had a “tough quarter” in China but he sees better times ahead.