Ford Hits a Profit Wall in North America

Steph Willems
by Steph Willems
ford hits a profit wall in north america

Ford Motor Company says its profits dropped 9 percent in the second quarter, and warns that leaner times are coming.

Net income, global market share, and earnings per share all fell, but the automaker’s financial news wasn’t all bad. Still, Ford plans to do some cost cutting as the red-hot new vehicle market cools off in North America.

Ford’s net income of $2 billion dropped $190 million from a year ago, and its pre-tax profit of $3 billion was down $293 million. Global market share fell three-tenths of a percent to 7.5 percent of the world’s rolling fleet. Still, its overall revenue was up 6 percent, and its pre-tax profit rose to $39.5 billion. Despite some dodgy overseas markets, European pre-tax profits tripled.

So, what’s the problem? Many automakers would love to have such income. Well, the problem is growth, and Ford doesn’t expect to see much of it anytime soon.

In North America, Ford faces a wall. The company’s pre-tax profit was 5.3 percent lower this past quarter than Q2 2015. American new vehicle sales have just about reached their peak, and Ford will have to ride out the coming sales slump. (Analysts expect total sales to fall next year, and reach bottom in 2019.)

According to Automotive News, Ford adjusted its full-year industry sales outlook from roughly 18 million vehicles to between 17.4 and 17.9 million. Speaking to the media in Dearborn, Ford chief financial officer Bob Shanks said “we don’t see growth in the near term.”

Shanks wasn’t too concerned about predictions, saying, “We’re starting to see a maturation of the economic cycle. We’re at a strong level. I think that will continue.”

To bump up revenue, Ford plans to reduce its operational costs, especially in manufacturing. Shanks didn’t go into much detail on other measures, but vehicle mix and pricing will be tweaked worldwide to boost sales.

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  • Jeff S Jeff S on Jul 28, 2016

    There was a lot of pent up demand for new vehicles after the sales slump starting in 2008 when many postponed buying new vehicles due to the economic crash. In the post slump sales volume went up mainly because of pent up demand and this continued growth cannot be sustained. The USA, Canada, and Europe are more mature growth markets with most of the continued growth in Asia especially China. There is a limit to how much vehicle sales volume can be sustained by increasing the term of the loan and low to no interest rates and making more attractive lower and shorter term leases. Vehicles last longer and many more are keeping their vehicles longer.

  • EBFlex EBFlex on Jul 28, 2016

    "Profits now, recalls later" was not a good business model that Big Al implemented.

  • Art Vandelay Dodge should bring this back. They could sell it as the classic classic classic model
  • Surferjoe Still have a 2013 RDX, naturally aspirated V6, just can't get behind a 4 banger turbo.Also gloriously absent, ESS, lane departure warnings, etc.
  • ToolGuy Is it a genuine Top Hand? Oh, I forgot, I don't care. 🙂
  • ToolGuy I did truck things with my truck this past week, twenty-odd miles from home (farther than usual). Recall that the interior bed space of my (modified) truck is 98" x 74". On the ride home yesterday the bed carried a 20 foot extension ladder (10 feet long, flagged 14 inches past the rear bumper), two other ladders, a smallish air compressor, a largish shop vac, three large bins, some materials, some scrap, and a slew of tool cases/bags. It was pretty full, is what I'm saying.The range of the Cybertruck would have been just fine. Nothing I carried had any substantial weight to it, in truck terms. The frunk would have been extremely useful (lock the tool cases there, out of the way of the Bed Stuff, away from prying eyes and grasping fingers -- you say I can charge my cordless tools there? bonus). Stainless steel plus no paint is a plus.Apparently the Cybertruck bed will be 78" long (but over 96" with the tailgate folded down) and 60-65" wide. And then Tesla promises "100 cubic feet of exterior, lockable storage — including the under-bed, frunk and sail pillars." Underbed storage requires the bed to be clear of other stuff, but bottom line everything would have fit, especially when we consider the second row of seats (tools and some materials out of the weather).Some days I was hauling mostly air on one leg of the trip. There were several store runs involved, some for 8-foot stock. One day I bummed a ride in a Roush Mustang. Three separate times other drivers tried to run into my truck (stainless steel panels, yes please). The fuel savings would be large enough for me to notice and to care.TL;DR: This truck would work for me, as a truck. Sample size = 1.
  • Ed That has to be a joke.