Mighty Truck Sales (and Cost Cutting) Fuel Ford's Q3 Income

Matthew Guy
by Matthew Guy
mighty truck sales and cost cutting fuel ford s q3 income

Ford Motor Company’s eagerness to quench North America’s insatiable thirst for light-duty pickups and SUVs drove the company to earn $1.6 billion in the third-quarter of 2017, according to an earnings report from Ford.

Also helping boost the automaker’s bottom line were some tasty foreign tax credits and an accountant’s best friend: cost reductions.

In addition to cutting costs across several different departments, Ford also saw costs driven lower by a non-repeat of the costly recall of this time last year. At the time, the company recalled nearly 2.4 million vehicles for problem door latches on vehicles ranging from the 2012-2015 Focus to the 2015 Mustang. Of course, the wonky door problem hasn’t entirely gone away.

In a statement, president and CEO Jim Hackett said, “This quarter demonstrates that our team’s focus on fitness is showing early promise,” going on to say, “We also know that we must accelerate that progress in the short term.” Reading between the lines, one could extrapolate that further cost cutting and shuffling of executive chairs may be on the horizon.

The numbers were further helped along by – what else – truck and SUV sales. Last month, Ford sold 82,302 of its F-Series trucks, its best month this year. It was only the fourth time since the beginning of 2010 that more than 80k of its full-sized pickups left showrooms in a single month. In fact, this year’s third-quarter sales were the best for F-Series since the heady days of 2005.

It’s not just volume pushing Dearborn’s profits higher. Average transaction prices of its trucks were $45,400 in Q3, up nearly $2,800 from one year ago. The entire segment is seeing a rise in average transaction prices (up an average of $1,600), but Ford has done a better job of moving the bucks-deluxe, high-profit models. Ford Credit also performed well, making $600 million in pre-tax profit.

SUV sales also helped Ford’s bottom line, with the Escape, Edge, and Explorer selling at a rapid clip. One would be wise to keep in mind that the high-profit Expedition and Navigator are just getting up to speed, so profits in upcoming quarters will be padded by those machines as well.

In anticipation of corporate tax-reform efforts, Ford brought $266 million in foreign tax credits back onto its U.S. balance sheet, continuing a planning practice it started in the second quarter. The explanation of this practice makes this author’s head spin, but suffice it to say that the exercise allows Ford to find some tax breaks to help offset expenses or reinvest in the business.

Wall Street expected the Blue Oval to post $32.8 billion in revenue this past quarter. Beating that number by $3.7 billion surely contributed to the company’s 2-percent share price bump seen in this morning’s pre-market trading. Still, the price languishes at around $12.25 a share.

In its earnings report, Ford states an operating margin of 8.1 percent and a market share of 13.5 percent in North America. Interestingly, the company partially blamed an underperforming European market (-1.2 percent margin and -$86 million pre-tax results) on “Brexit effects.”

[Image: Ford Motor Company]

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  • Oldschool Oldschool on Oct 26, 2017

    It makes you wonder what other parts Ford is cheapening out on. To screw up on door latches really makes the company look like it's lost its way. They're betting way too much on truck sales to get them by, and the retarded brainwashed consumers that are buying them that will drown in debt by those $60,000+ truck purchases. Seriously, how can this even be an issue? Doors not shutting correctly or being stuck closed? I've never had door latch problems on any cars I've owned, including my older cars. I've owned both Ford and GM cars, and each one is still good carmakers, but they honestly don't a give a shit sometimes and it's the culture of both brands of not caring that is one of the main reasons why problems like this exist. The Japanese have an honor code of some sort and is very keen on making sure their products are the best they can be, I wish American companies thought this way. Until the culture and attitude changes, both companies will find themselves on the brink of bankruptcy again in the coming years. At the same time, both brands make excellent products, you just have to know what models to look for. Generally speaking the smaller, eco-compacts suck, and probably will have more problems than their mid-size models. I own a 17 Impala and love it. I really don't know why more people aren't buying them as they cost about the same as other mid-size cars, yet you get more car for your money, the value is incredible. Getting one used at a year old is a steal, especially the V6 LT model. I've also had zero problems with it, and drive all around town for hours a day for Uber, so I know they can make great cars and can compete with the best of them. But this is just ridiculous.

  • Gmichaelj Gmichaelj on Oct 26, 2017

    Just looking at the auto press summaries, and without diving into their 10-Q: I am surprised that the new CEO didn't take the opportunity to incur more losses, now, so he could blame them on prior mgt. and then artificially book some gains later when he might need them.

  • Brett Woods My 4-Runner had a manual with the 4-cylinder. It was acceptable but not really fun. I have thought before that auto with a six cylinder would have been smoother, more comfortable, and need less maintenance. Ditto my 4 banger manual Japanese pick-up. Nowhere near as nice as a GM with auto and six cylinders that I tried a bit later. Drove with a U.S. buddy who got one of the first C8s. He said he didn't even consider a manual. There was an article about how fewer than ten percent of buyers optioned a manual in the U.S. when they were available. Visited my English cousin who lived in a hilly suburb and she had a manual Range Rover and said she never even considered an automatic. That's culture for you.  Miata, Boxster, Mustang, Corvette and Camaro; I only want manual but I can see both sides of the argument for a Mustang, Camaro or Challenger. Once you get past a certain size and weight, cruising with automatic is a better dynamic. A dual clutch automatic is smoother, faster, probably more reliable, and still allows you to select and hold a gear. When you get these vehicles with a high performance envelope, dual-clutch automatic is what brings home the numbers. 
  • ToolGuy 2019 had better comments than 2023 😉
  • Inside Looking Out In June 1973, Leonid Brezhnev arrived in Washington for his second summit meeting with President Richard Nixon. Knowing of the Soviet leader’s fondness for luxury automobiles, Nixon gave him a shiny Lincoln Continental. Brezhnev was delighted with the present and insisted on taking a spin around Camp David, speeding through turns while the president nervously asked him to slow down. https://academic.oup.com/dh/article-abstract/42/4/548/5063004
  • Bobby D'Oppo Great sound and smooth power delivery in a heavier RWD or AWD vehicle is a nice blend, but current V8 pickup trucks deliver an unsophisticated driving experience. I think a modern full-size pickup could be very well suited to a manual transmission.In reality, old school, revvy atmo engines pair best with manual transmissions because it's so rewarding to keep them in the power band on a winding road. Modern turbo engines have flattened the torque curve and often make changing gears feel more like a chore.
  • Chuck Norton For those worried about a complex power train-What vehicle doesn't have one? I drive a twin turbo F-150 (3.5) Talk about complexity.. It seems reliability based on the number of F-150s sold is a non-issue. As with many other makes/models. I mean how many operations are handle by micro processors...in today's vehicles?