By on April 26, 2019

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Automakers find themselves a bit of a pickle right now. The shift towards “mobility” has resulted in high development costs for electric and autonomous vehicles in the midst of stagnating sales growth. There’s also a trade war hurting global demand and impacting supply chains. Ultimately, this resulted in a lackluster Q1 for many manufacturers.

Ford’s situation was symbolic of the industry’s general plight, per its 34-percent decline in net revenue for the first quarter of 2019, but it wasn’t without a warm ray of hope. The company posted a 12-percent increase in earnings (before before interest and taxes) over the same period due to North America’s consistent desire to own SUVs, crossovers, and pickups. Ford’s share price also improved, hitting the $10 mark for the first time since August of 2018 on Friday.

With all that good news, many probably wonder what caused net revenue to climb into the toilet like an overly curious ferret. As it turns out, saving money can be pretty expensive. 

Ford’s in the midst of a rather massive restructuring phase at the moment. With the global sales ceiling coming into view for the entire industry, the Blue Oval was inclined to launch a $11-billion restructuring program. The opening lines of Ford’s latest earnings report dealt with addressing the $600 million decline in net income related to “special charges.”

Those included things like ending heavy truck operations in South America, altering the firm’s European operations, and pulling out of Russia. Roughly $24 million also went to the ongoing layoffs of salaried employees in North America, though Ford previously claimed staffing reductions (at least in its home market) would soon be over.

Killing the Focus also cost Ford $67 million, while closing the failed Chariot urban-shuttle program tacked on another $11 million. Losses tied to increased investment for “mobility services and autonomous vehicle business development” totaled another $288 million before taxes.

The automaker claims all of these expensive items snowball into billions of savings/profit by the end of the year (okay, maybe not the mobility stuff). Ford noted that its European operations improved from the previous quarter and are now profitable. Ford Credit also posted an $801 million profit in Q1, taking in cash in volumes it hasn’t seen in nearly a decade.

“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, during the company’s Q1 earnings announcement. “Our global team continues to restlessly strive to improve our operational fitness, delight customers with ever-improving vehicles and services, and prepare Ford to win in the future. Our goal remains to become the world’s most trusted company, designing smart vehicles for a smart world.”

Market analysts seem torn on whether or not Ford has finally righted the ship; the general consensus is that this report is a very good sign. What comes next is key.

[Image: Ford Motor Co.]

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21 Comments on “Ford’s Earnings Show That Saving Money Can Be Expensive...”


  • avatar
    28-Cars-Later

    “The shift towards “mobility” has resulted in high development costs for electric and autonomous vehicles in the midst of stagnating sales growth.”

    Ford is in a pickle alright, will they ever profit on either of those white elephants?

    • 0 avatar
      ToddAtlasF1

      Stupidity has hit critical mass. You know Western Civilization has seen its best days when Bill de Blasio is planning on finishing what Al Qaeda started in the name of climate change while child molesters exert influence over scientific research.

      • 0 avatar
        JimZ

        you wouldn’t know science if it bit you on the spleen.

        • 0 avatar
          ToddAtlasF1

          I have a degree with science right in the title. I understand the scientific method. I also know that when you have a model that consistently fails to produce outcomes that correlate to those of what you’re modeling, you change that model.

          Unlike you, I don’t believe liars who keep changing their lies as they’re revealed while insisting the outcome of everything that has occurred will always be the same as what they first claimed. When you insult someone, you should consider that there are dogs that have learned more from their experiences than you have.

          The end is still twelve years away, just as its been since Paul Ehrlich figured out the ideal ecological collapse event window to manipulate imbeciles with back in 1968. I’m sure you’ll still be just as gullible if you live to see the hundredth anniversary of the twelve year apocalypse cult you’ve been absorbed by. What’s going along to get along doing for you? Do you think the marxists you white-knight for don’t laugh at your incel and NPC statuses? Stop lying to yourself and everyone else. Next thing you know, you’ll have some self respect and you’ll stop being the butt of the biggest jokes of our time. Real scientists don’t have their boats frozen into glaciers they were in the process of denying the existence of. Justice doesn’t need any qualifiers when it is real. Don’t work towards your own destruction just because Carlos Slim pays someone to tell you it makes you smart.

          • 0 avatar
            civicjohn

            @Todd,

            I wish I knew what in the heck you are talking about. Reading this makes me feel like I’m following a drunk driver on the interstate.

            Could you toss out a “dumb-downed” version of your point?

    • 0 avatar
      JMII

      Mobility shift? The only shift I see is millennials that can’t afford cars while trucks keep getting more expensive. While I understand that automakers don’t want to be late to the party it appears the invitations haven’t even been written out yet.

  • avatar
    sportyaccordy

    Their net income was down 34%, not revenue. I don’t even think net revenue is a thing. This is the second time I’ve seen this mistake today.

    • 0 avatar
      ect

      “Net revenue” is another way of saying “net sales” – i.e., sales revenue net of discounts and returns. Which is a far cry from net income.

      I have no idea how or why Matt decided to use this particular wording. It certainly isn’t correct (as you point out) and it isn’t found in Ford’s earnings announcement. It could be a reflection of financial illiteracy, I suppose.

  • avatar
    Crosley

    I’m not really buying into the “trade war” hurting all that much. Ford posted a 12% increase in earnings, somehow car companies are doing just fine.

    Countries like China are doing poorly and not buying globally because it’s a fake house of cards and simply collapsing. American GDP, unemployment, stock market, job creation, etc are setting records.

    “Trade war” is an over used meme for anything people don’t like. Most all of this outsourcing plans were in place well before Trump became President.

    • 0 avatar
      deanst

      Ford has stuffed their sales channels, with production vastly outstripping sales. This will likely be their best quarter of the year.

      • 0 avatar
        civicjohn

        @deanst,

        yup, they killed it. I think there are more quarters that will support that. Stock up over 20% in the last 30 days, and still kicking out a 6.8% dividend.

        Bring on the “stuffed sales channel” with the new Explorers and the Lincoln SUVs. Nothing lasts forever, but finally they are doing something right. The Rivian investment may very well be a good move.

    • 0 avatar
      Luke42

      If you don’t think the trade war is a problem, I suggest you read up on “the gains of trade” in an econ textbook.

      The short answer is that both nations are always enriched by trade — otherwise the trade won’t happen.

      There’s a big caveat that most econ 101 textbooks leave out, though. The gains of trade are not evenly distributed within a society and so, while a nation may be enriched by trade, some people who live in that nation may be f*cked over while others end up better off. White the United States as a whole is enriched by trade, there are winner and losers. Trump’s answer to this is to give up the gains of trade, thereby making the United States poorer overall.

      There are, of course, other ways to make sure that the people who lose out from unrestricted trade (while the rest of us get richer) don’t get f*cked over. I started out life as a sink-or-swim libertarian, but I’ve now come to believe that the social programs pushed by Democrats are actually a pretty good answer to this question. If we take care of our poor people (both white & black) who’ve been f*cked over by factory closures, then we can have our cake and eat it too. All I have to do is agree to pay for it via taxes, and I personally am willing to do so — I will be better off (because I work in global industry), and my fellow countrymen will be better off, too (because of an improved economy + social programs to help those f*cked over). Having our cake and eating it too (with some tax increases) looks much better than blustering our economy into a self inflicted recession by cutting off foreign trade (and the lower prices for American consumers and the increased number of customers for American producers that come with it).

      • 0 avatar
        Crosley

        This is the sort of hysterics I’m talking about, nobody is asking for a trade embargo or to end international trade.

        We’re talking about the equivalent of a sales tax here with a country that is a national security threat, violates all sorts of human rights, is not a democracy (President for life), and treats workers like animals.

        And the USA seems to be doing just fine in the middle of this “awful” trade war. Better than fine, this is one of the best economies in several generations.

      • 0 avatar
        ToddAtlasF1

        Do some research into how much ships pollute and then get back to me about sacrifices you’ll make for the economic security of billionaires.

        • 0 avatar
          civicjohn

          @Todd,

          OK I’ll do some research about how ships pollute and the correlation of billionaires. Why in the he*l aren’t we putting our best foot forward that stomping out cargo ship pollution?

          You can’t have it every way that gives you some sort of personal validation. If you’re WOKE, all good with me, but it just seems like F had a good run.

          Some of us who are active participants in the market know what we are getting into, it’s gambling at the highest level.

          But this BS about how TSLA is reducing our carbon footprint is stupefying. Also, just dig into the financials and and see if you feel comfortable that TSLA is “growth stock”.

          It’s not.

  • avatar
    Steve203

    The nice thing about “restructuring” charges is Wall St treats them like a one off, so lots of costs can be tossed in that bucket, where the Street ignores them, to inflate the “adjusted” net profit and EPS.

    You can also goose profits by cutting back on R&D, like, for instance, “partnering” on another company’s work, like Mahindra’s, or JMC’s, or Rivian’s, or VW’s. Makes net earnings look good, until the other company that did all the heavy lifting on the new products presents it’s bill for engineering services.

    The bigger laffer is touting EBITA. Interest and taxes are real, cash, charges that cannot be ignored. Chrysler always used to goose it’s return on capital by carrying a lot of debt. Worked fine, until sales went soft in the 70s and the company couldn’t service it’s outsized debt load.

  • avatar
    dwford

    I’m still trying to figure out where the billions of profits over the last decade got spent. They talk about expensive EV vehicle development costs, but other than the Mach E and the F150 EV, they seem to be outsourcing at least one vehicle to Rivian, and plan to borrow VWs EV platform for others. So Ford isn’t really developing a fleet of EVs at its own expense, just some plug in versions of the gas models. Where’s all the money gone?

    • 0 avatar
      sgeffe

      Furniture for the CEO’s office?! ;-)

    • 0 avatar
      JimZ

      “I’m still trying to figure out where the billions of profits over the last decade got spent.”

      reading the earnings report isn’t that hard, it was even linked in the article:

      “Ended the quarter with $24.2B in cash and $35.2B in liquidity; both above targets”

      Plus there was that whole complete redesign of pretty much every vehicle architecture in the lineup; the oldest is the Flex which is about to go away but everything else was significantly re-designed (or all new) within the last decade.

      I dunno, seems like investing in new products and maintaining a healthy “rainy day fund” are good uses of those profits.

  • avatar
    ToolGuy

    Restless: unable to rest or relax as a result of anxiety or boredom.
    synonyms: uneasy, ill at ease, restive, fidgety, edgy, on edge, tense, worked up, nervous, agitated, anxious, on tenterhooks, keyed up, apprehensive, unquiet, impatient

    Sounds like a perfect working environment for optimum decision-making and engendering trust. /S

    “designing smart vehicles for a smart world”
    – Look around you and tell me if the world you see is generally smart or dumb. (Designing dumb vehicles for a dumb world is a proven, winning strategy.)
    – Design all you want, but you also have to build, sell and service them.


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