Re­calls and lower sales hit Ford’s lat­est re­sults

But com­pany still on track to make $9bn for full year

The National - News - Business - - Inside track -

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.”

Jeff Kowal­sky / Bloomberg

Ford’s Bob Shanks said the com­pany had a “tough quar­ter” in China but he sees bet­ter times ahead.

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