As Justice Department Launches Ford Probe, Automaker Surprises Investors

Steph Willems
by Steph Willems
as justice department launches ford probe automaker surprises investors

That headline was unavoidable, by the way. On the same day Ford Motor Company released a better than expected first-quarter earnings report, it also revealed the Justice Department has opened a criminal investigation into its emissions certification process — a probe that could see fuel economy ratings rolled back.

Wall Street seemed much more interested in the financial news, however, giving the company’s stock a much-needed lift. In the Glass House, Jim Hackett must be smiling.

The testing probe has to deal with Ford’s road load calculations, an issue that came to light earlier this year when Ford launched an investigation of its own. In a filing to the U.S. Securities and Exchange Commision, the automaker warned it “cannot provide assurance that it will not have a material adverse effect.”

Ford claims the “matter currently focuses on issues relating to road load estimations, including analytical modeling and coastdown testing.”

In a statement reported by CNBC, Kim Pittel, Ford’s vice president of sustainability, environment and safety engineering, said, “Our focus is on completing our investigation and a thorough technical review of this matter and cooperating with government and regulatory agencies.”

If the automaker’s math turns out to be wonky, several unnamed models might end up saddled with new, and perhaps unfavorable, fuel economy and emissions figures. The news wasn’t enough to scare off investors, however. The company’s stock rose more than 8 percent in extended Thursday trading, and the climb continues on Friday.

What did investors see? Improved North American margins and profit, plus adjusted earnings per share of 44 cents (unadjusted: 29 cents) — a better return than the forecasted 27 cents. Ford took an axe to its overseas operations in Q1 2019, incurring one-time financial hits. Still, the overseas operating loss of $196 million was a steep climb-down from last quarter’s loss, with the company’s Europe, Middle East and Africa, and Asia-Pacific regions posting profits. South America and China made up the overseas loss. Automotive revenue of $37.24 billion outpaced forecasts, despite the company’s overall revenue falling year-over-year.

Much like in previous quarters, Ford’s bread basket continues to be North America, where earnings before interest and taxes rose to $2.2 billion from Q1 2018’s $1.9 billion. Thank Ford truck sales and an elevated Lincoln brand for that, as well as the 8.7 percent margin (up from 7.8 percent, year over year).

While Ford’s chief financial officer, Bob Shanks, claimed Q1 will probably be the company’s best quarter this year, he sees 2019 delivering “better results” than 2018. For the sake of CEO Jim Hackett, the earnings report is hopefully the start of a new chapter for Ford … and the beginning of a sustained upward trend in the company’s stock. His job depends on it.

“With a solid plan in place, we promised 2019 would be a year of action and execution for Ford, and that’s what we delivered in the first quarter,” said Jim Hackett, Ford president and CEO. “We’re pleased with the progress and the optimism that it brings.”

The coming year brings with it numerous launches of higher-margin vehicles, including the Lincoln Aviator and Corsair, and Ford Super Duty, Explorer, and Escape. The resurrected Ranger pickup went on sale in January.

[Image: Ford]

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  • Inside Looking Out Inside Looking Out on Apr 28, 2019

    Does anyone know is it going to be ICE powered or BEV? What platform? RWD or FWD? Last time it was Mazda IIRC. I am actually interested. I always liked Probe.

  • Lorenzo Lorenzo on Apr 29, 2019

    I always thought the Probe name sounded dirty. Maybe that was part of the appeal? It didn't appeal to many: more Mustangs were sold in its first year than the Probe sold in six years.

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  • Jim Bonham Full EVs are not for everyone, they cannot meet all needs. Hybrids do a much better job of providing the benefits of EVs without most of the drawbacks. I have a hybrid sedan with plenty of room, plus all the bells and whistles. It has 360 hp, AWD, does 0-60 in just over 5 sec.(the instant torque is a real benefit), and I get 29 mpg, average. NOT driven lightly. I bought it used for $25k.Sure, it's a little heavier because of the battery, motor, etc., but not nearly as much as a full EV. The battery is smaller/lighter/cheaper and both the alternator and starter motor are eliminated since the motor assumes those functions. It's cool to watch the charge guage show I'm getting energy back when coasting and/or braking. It's even cooler to drive around part of the time on battery only. It really comes in handy in traffic since the engine turns off and you don't waste fuel idling. With the adaptive cruise control you just let the car slowly inch along by itself.I only wish it were a Plug-in Hybrid (PHEV). Then, I'd have A LOT more EV-only range, along with even more of that instant torque. The battery would be bigger, but still a fraction of the size of a full EV. I could easily go weeks without using much, if any gas (depending upon my commute) IF I plug it in every night. But I don't have to. The gas engine will charge the battery whenever it's needed.It's just not as efficient a way to do it.Electric companies offer special rates for both EVs and PHEVs which lower your operating cost compared to gasoline. They'll even give you a rebate to offset the cost of installing a home charger. You can still get federal (up to $7,500, plus some state) tax credits for PHEVs.What's not to like? My next daily driver will be a PHEV of some kind. Probably a performance-oriented one like the new Dodge Hornet or one of the German Hybrid SUVs. All the benefits, sound, feel, etc., of a gas vehicle along with some electric assist to improve fuel economy, performance, and drivability. None of the inherent EV issues of cost, range anxiety, long charging times, poor charger availability, grid capacity issues, etc. I think most people will eventually catch on to this and go PHEV instead of going full EV. Synthetic, carbon-neutral eFuels, hydrogen engines, and other things will also prevent full EVs from being 100% of the fleet, regardless of what the politicians say. PHEVs can be as "clean" (overall) as full EVs with the right fuels. They're also cheaper, and far more practical, for most people. They can do it all, EVs can't.
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