Ford to Investors: We Have Good News and Bad News

Steph Willems
by Steph Willems

Despite posting a 7 percent increase in revenue and a net income of $2.4 billion (up from a $800 million loss a year ago), Ford’s fourth-quarter 2017 earnings missed analyst expectations. Blame a few key factors.

First, Ford faced an increase in commodity prices, ratcheting up the cost of steel and aluminum. Add to that increased warranty costs, unpleasant foreign exchange rates, and sinking sales in China, and the company’s pretax profit fell 19 percent from a year ago, hitting $1.7 billion.

As the company seeks to convince investors to put its trust in the automaker’s vision, Ford delivered earnings of 39 cents per share, not the 42 cents analysts projected.

“Our balance sheet remains strong and we are focused on improving the company’s fitness to strengthen future results,” said Ford’s chief financial officer, Bob Shanks, in a statement. “We remain committed to providing value to our shareholders including expected distributions totaling about $3.1 billion in 2018.”

In a conference call with the media, however, Shanks said, “We have to be far fitter than we are, regardless of what the future is.”

Ford CEO Jim Hackett has talked of creating a leaner, more resilient company since taking the helm last year. Part of the plan includes culling existing vehicles, though we don’t yet know exactly which models those will be. As well, Ford plans to invest in cutting edge technologies — autonomous driving systems and electric powertrains — while pursuing the growing green market in China.

It will take time before the automaker reaps a financial reward from these actions, if indeed they pay off.

In the meantime, while the automaker remains strong in the North American market (where it increased its market share and revenue last quarter, only to see commodity and development costs shrink its operating margin and profits), it needs to stem some overseas bleeding. Ford posted a loss in both South America and the Middle East and Africa. It barely held its head above water in the Asia Pacific region, while European profits sank 66 percent.

Since the start of trading Thursday, Ford’s stock price fell 4.23 percent, driving what had been a flat week lower. That’s the opposite direction of good, especially considering the reason Hackett’s predecessor received his walking papers.

As for unionized Ford autoworkers in the United States, last year’s financials mean a smaller profit-sharing check this time around. This year’s payout amounts to $7,500, some $1,500 less than last year.

[Source: Reuters]

Steph Willems
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  • Big Al from Oz Big Al from Oz on Jan 25, 2018

    I think Ford's woes and their excuses are vague. There are plenty of manufacturers who have improved their bottom line. Commodity pricing is global, its not as if Ford pays more for commodities. Or has Ford chosen the wrong commodity for their biggest seller? Ford even has a large range of SUVs and CUVs. Again, Ford's aluminium F Series venture cost them a sh!tload ...... of borrowings. I know I'll get the usual "but look at pickup profits"comments. But what are Ford's REAL aluminium Wunder Trux earnings? I mentioned this about Ford's profits due to the aluminium conversion from the very beginning. Even then it was evident that Ford will remain the number two pickup maker in the US. Ford's aluminium wunder trux have moved to SUVs to try to spread the costs further, but expenses will increase, so it might be a big a gain as Ford is wanting. Ford has a long way in matching GM for supremacy in the full size pickup and the platformed shared SUVs. When it is costing thousands more to produce an equivelant product you can't expect to be as competitive. So, Ford will profit less. The F-150 isn't that great I had a new Coyote power aluminium wunder truck for over 6 months, the couple of Rams I've had were better on a daily basis, and they cost less to produce and sell. Ford, aluminium was the wrong choice. High tensile steel was a far cheaper option, you had the technology to use it. Aluminium is good when used correctly for the correct application. Your program office obviously didn't read the articles researching the cost of aluminium in transport, from design to the user of the end product.

    • See 7 previous
    • Art Vandelay Art Vandelay on Jan 27, 2018

      @gmichaelj If only there was some, I don't know, web we'll say, full of information information where someone could spend 10 seconds and look up such information. Yes, wit respect to full sized Pickuos Ford outsells both GM models by an amount roughly equal to the total number of fullsized trucks Toyota sold in 2017 and before you say that is an insignificant number id point out it is barely under the amount of midsized trucks GM sold.

  • PrincipalDan PrincipalDan on Jan 26, 2018

    Eh... This only becomes a story IF it becomes a big enough deal that during the next major redesign Ford switches back to steel.

    • Gmichaelj Gmichaelj on Jan 26, 2018

      "... during the next major redesign Ford switches back to steel." I can only imagine how the resale value of Used Alum Fords would shoot up if Ford went back to Rust-bodies.

  • El scotto Hyundai/Kia's true masters are finally revealed.
  • El scotto Stirring up some more. The GSA is required to buy vehicles from the Big 3. This shows the Federal Government tacitly supports the UAW. Yeah I've seen some Hyundai or Kia hybrids. I didn't pay much attention the EV/American parts percentage tax credits. It looks like a lot of skullduggery. The UAW coming to SEC-land may be the beginning of the end of SEC-land being the US's internal third world country.The US is bringing more manufacturing back from China. Our demographics are shrinking. Unskilled labor will cost more, a union job might not pay enough.
  • El scotto I look forward to watching MTG and Tommy Tuberville when the UAW comes to their states.
  • El scotto Vehicle company white collar (non-union) engineers design the parts and assembly procedures. The UAW members are instructed on how to install the parts. Engineers are also in charge of quality control. The executives are ulimately responible for the quality of their products.
  • Chris P Bacon I don't care either way, the employees have the right to organize, and I'm never going to buy a VW. But.... It would be interesting if the media (HINT HINT) would be able to provide a detailed look at what (if anything) the VW workers gain by unionizing. There will be dues to pay. How much? I bet the current policies, pay and benefits mirror other auto companies. When all is said and done an the first contract signed, my money is on the UAW to be he only ones who really come out ahead. That leads into my next comment. Once a union is voted onto the property, it is almost impossible to get rid of them. Even if the membership feels the union doesn't have their best interests in mind, the hurdles to get rid of them are too high. There were a lot of promises made by the UAW, even if they don't deliver, they'll be in Chattanooga even if the membership decides they made a mistake.