kscarbel2 Posted October 28, 2016 Share Posted October 28, 2016 Ford Reports Lower Profit The Wall Street Journal / October 27, 2016 Ford Motor Co.’s third-quarter earnings fell 56% compared with the same period in 2015, hurt by hefty recall expenses, weaker U.S. shipments and product-launch costs in its core North American operation. The No. 2 U.S. auto maker on Thursday reported nearly $1 billion in profit for the period ended Sept. 30, down from $2.2 billion in the same period a year earlier. The prior-year’s performance benefited from high prices Ford was commanding for the then-newly redesigned F-150 pickup truck. The Dearborn, Mich., auto maker said operating profit was 26 cents a share, topping analysts’ expectations for 20 cents a share as recall expenses and marketing costs were lower than investors’ anticipated. Still, results were hit by $600 million in costs tied to faulty door latches. Revenue declined 6% to $35.9 billion as weaker sales in the U.S. contributed to a global shipment drop. The company said it had $2 billion in cash outflows in the third quarter, and expects to return to positive cash flow in the fourth quarter. While Ford remains profitable, third-quarter sales jitters underscore concerns about Detroit’s ability to continue increasing margins or sales amid a U.S. market plateau. While results at smaller U.S. auto makers Fiat Chrysler Automobiles NV and Tesla Motors Inc. recently showed their potential for future earnings or revenue growth, General Motors Co. and Ford posted deteriorating North American margins during the quarter even as U.S. demand for trucks and SUVs surged. Ford reaffirmed 2016 guidance of $10.2 billion adjusted pretax profit and reiterated its full-year North American margins will be below that of 2015. The auto maker plans to further trim production in the fourth quarter to reflect softer U.S. volumes. “What’s happening in the company is really what’s happening in North America,” said Ford finance chief Bob Shanks. North American margins exceeded 12% of sales in the third quarter of 2015, but fell to 5.8% in the most recent quarter, or 8.4% excluding recall costs. Coming off 2015’s record pre-tax profit, Chief Executive Officer Mark Fields is combating weak conditions in South America and a weaker outlook in the U.K. resulting from the country’s vote in June to exit from the European Union. Rising sales and profitability in China and an uptick in European profits helped counter the quarter’s 57% drop in North American profit, which accounts for more than 90% of Ford’s earnings. Its operating income in North America last quarter was $1.3 billion, compared with $2.9 billion in the same period last year. Earlier, the auto maker issued a weaker outlook in the U.S. for its second half and said it expects industry sales to continue falling through 2017, putting pressure on executives to lift earnings in overseas operations. In Europe, Ford posted an operating profit of $138 million compared with $9 million in the same year-ago period, sidestepping currency declines and softer sales in the U.K. tied to the Brexit impact. Ford took steps to counter industry weakness in the U.K, including raising new-car prices 2.5% in September and reducing dealer stock. The company expects Brexit to lead to $140 million in negative earnings impact in the second half of 2016 and to shave another $600 million from earnings in 2017. In Asia Pacific, Ford recorded a $131 million operating profit, up from $22 million a year ago, as its sales in China surged during the quarter. Margins rose in China in the third-quarter to 13.4% versus 12.7% a year ago, but Ford sells a fraction of the volume in China compared with what it sells in the U.S. Ford’s operating losses in South America deepened to $295 million, from $163 million in the third quarter a year ago, but Mr. Shanks said the market there is showing signs of bottoming out and the company expects a turnaround next year. Quote Link to comment Share on other sites More sharing options...
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