By on October 24, 2019

Analysts predicted a less-than-stellar quarter for Ford Motor Company, so it was not a shock to see turbulence in the company’s third-quarter financials. The company’s net income dropped 57 percent in Q3 2019, the result of currency changes and restructuring efforts. Revenue ($37 billion) was down on a global scale, shrinking 2 percent. Earnings per share shrunk from 25 cents to 11 cents.

While the automaker finds itself in the midst of ongoing cost-cutting and a reorganization of its regional businesses, the North American launch of a key product didn’t go as planned, forcing Ford CEO Jim Hackett to claim the company’s efforts fell below expectations.

As you’ve read here, there, and everywhere, quality issues plaguing the 2020 Explorer saw thousands of new vehicles, including the model’s Lincoln Aviator platform mate, make a trip from Chicago Assembly to a makeshift repair shop at Michigan’s Flat Rock Assembly, bypassing anxious dealers. According to reports, some dealers are carrying out their own repairs before making the vehicles available for sale. The botched launch saw third-quarter sales slump, though the automaker has since stated that supply is on the upswing.

“Simply put, we took on too much,” said Ford’s president of automotive, Joe Hinrichs, in a remark reported by Automotive News‘ Michael Martinez. Hackett, speaking alongside Hinrichs on the earnings call, commented, “We have higher expectations for our performance.”

That said, both men felt the media gave the company an unfair shake, with Hinrichs calling reports of thousands of new Explorers and Aviators piling up outside Flat Rock “overly dramatized.”

“Flat Rock was not evidence of chaos, it was evidence of us making things right,” he said. Hackett claimed he wasn’t happy with the media’s view “of the way we’ve worked through this.”

We’ll let you be the judge of whether Ford communicated its response to the issue in a proper and sufficient manner.

As for the company’s financials, Ford says its $425 million net income for the quarter is a product of a $1 billion one-time charge related to restructuring, including its pair-up with India’s Mahindra. The company now expects full-year pre-tax earnings to fall between $6.5 billion and $7 billion, down from a projected $7 billion to $7.5 billion.

North America remains the company’s breadwinner, with revenue up 5 percent over Q3 2018. Other markets took on red ink, thanks to currency changes, falling vehicle sales, and restructuring efforts. Chinese revenue fell 27 percent for the quarter; Europe sank 14 percent, and South America’s proceeds declined by 19 percent.

Tim Stone, Ford’s chief financial officer, wasn’t worried about short-term upsets.

“We are laying the groundwork for consistently higher customer experience and future growth in free cash flow and profitability,” he said “We have a bias for action and are driving disciplined, long-term execution.”

[Image: Ford]

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48 Comments on “Ford Takes a Third-quarter Hit, Top Brass Talk Botched Explorer Launch...”


  • avatar
    R Henry

    “Tim Stone, Ford’s chief financial officer, wasn’t worried about short-term upsets.”

    –Actually, he and all the other C-Suiters correctly just shat their pants.

  • avatar
    Greg Hamilton

    Tesla market cap today valued at more than $45 billion. Ford worth $36 billion according to Barrons.

  • avatar
    tomLU86

    So media reports of a quality issues on the Explorer/Aviator ARE true!

    It’s not like I can drive by the plant, or if I could, I could see what’s happening.

    Maybe some of the salaried employees they cut weren’t there to prevent this debacle.

    How did the cost reduction work out, Jim?

    Maybe you can salvage things though. Here, try this:

    “Ford. Twice as good, because we build each one twice!”

    TTAC will get in touch with me so I can get my royalty of $0.25 for each car sold.

  • avatar
    Verbal

    Ford Explorer and Lincoln Aviator: Immobility Solutions.

  • avatar
    dwford

    Nothing new to see here. This has been how Ford does it as long as I have been reading about cars – 40 years. I’m sure their long history of starting to build 1/2 baked products, then scrambling to fix them goes back even further than that.

    • 0 avatar
      R Henry

      ….As if GM isn’t similarly guilty. Remember Fiero? Olds Diesel? Caddy 8-6-4? Caddy HT4100? Caddy Northstar?

      • 0 avatar
        jamespdx

        Yeah, compared to GM (and Chrysler in the same period) Ford is a bright spot. The worst thing they did in the same period was the Variable Venturi Carburetor and the HORRIBLY redesigned 80 T-birds and Cougars . . . and perhaps not downsizing fast enough – tho that turned into a sale bonanza for the Town Car.

        • 0 avatar
          SCE to AUX

          The solution to the horrible VV carburetor on my 82 LTD was a Holley 2-barrel.

          • 0 avatar
            R Henry

            I think VV is the best illustration of how awful cars of that period were. Chrysler’s LeanBurn electronically controlled carburetors were horrible, yes, but Variable Venturis were worse still.

            As for replacing with a Holley…would you believe that where I live in CA, vehicles as old as model year 1975 are subject to bi-annual emissions inspections? The rules are so strict that it is essentially illegal to modify your engine in any way that might effect its emissions calibration. As such, the modification you describe is not allowed here…even though it probably, on balance, results in fewer emissions from the tailpipe.

    • 0 avatar
      TMA1

      Slapping a sticker on the dash was good enough for Ford in the ’70’s, and it should be good enough now.

  • avatar
    puddleJumper

    I ran “Simply put, we took on too much” and “We have higher expectations for our performance” through Google Translate, and it came back “We f*cked up, but we’ll never take responsibility for it.”

  • avatar
    ToolGuy

    F stock down 78% since 1999.

    (S&P 500 up over 200% in same timeframe. Ouchers. Memo to Ford family – buying an index fund is easy. Running a “car” company is hard. Which one pays off better?)

    [Dumbing it down: Would you rather have $22 (left hand) or $200 (right hand)?]

    • 0 avatar
      highdesertcat

      It’s also an indication of where new-car sales are trending down. Peak was 2017, or there abouts, and has been mildly trending downward ever since, from 17.5 down to 17, and maybe even lower for 2019.

      I watched the CEO of Group 1 Automotive on TV this morning and they are betting on the used car market because their used-car sales saw a healthy uptick, mainly from off-leases and rental vehicles. A lot of people see more value in buying a used vehicle than in buying a new overpriced vehicle.

      No doubt Ford could have done things better, but the whole US auto industry is in a mild decline that will become steeper into 2020.

      Again politics will rear its ugly head and affect the US auto industry based on the outcome of the 2020 General Election.

      New-car sales and general public optimism will be directly influenced and affected by the outcome of that election, just like it was in Nov 2016.

      • 0 avatar
        ToolGuy

        highdesertcat,

        So politics and a two-year trend explain 20 years of extreme underperformance. Got it. (Because no other companies in the S&P 500 were affected by the Clinton-Bush-Obama-Trump administrations.)

        Memo to Ford family: highdesertcat is the financial advisor you want.

        • 0 avatar
          highdesertcat

          ToolGuy, maybe you should LISTEN to what industry analysts have to say, like maybe on Bloomberg, WSJ, Forbes, CNBC, NBR and others.

          The auto industry CEOs are betting the future of their companies on what their analysts are forecasting.

          • 0 avatar
            ToolGuy

            James Hackett has a plan for James Hackett regardless of what happens to Ford.

            The Ford family is dramatically mismanaging their fortune.

            (Perhaps they weren’t watching enough CNBC over the past two decades… but I suspect the issues go deeper…)

            [Now you’ll excuse me while I go inherit my father-in-law’s business and collect my wife’s pension, as all good self-made men do. BWHAHAHAHAHA!!!]

          • 0 avatar
            civicjohn

            @highdesertcat,

            “The auto industry CEOs are betting the future of their companies on what their analysts are forecasting.”

            A perfect example of why overpaid C-level management don’t deserve what they are paid. Each c-level exec should spend 90 days on the plant floor and see if they can keep from getting hurt. If they do get hurt….big loss…

          • 0 avatar
            highdesertcat

            ToolGuy, jealousy and envy won’t get you very far. I didn’t inherit sh!t.

            It all belongs to my wife and her sisters. My own income is less than $2500 a month, and we keep separate bank accounts, hers, mine and ours.

            I left Ford after my wife’s 1992 TownCar. I was leery about switching to Toyota, but Toyota impressed the hell out of me with their 2008 Japan-built Highlander. Been a Toyota convert ever since with two Tundra trucks and a Sequoia.

            Ford has been making bad decisions a long time with only Alan Mullaly as a bright spot.

            But that doesn’t offset where the SAAR has been headed.

          • 0 avatar
            highdesertcat

            civicjohn, an interesting concept of on-the-job-training on the plant floor.

            America’s industries, America’s growth are all rooted in the “class” system, or “station-in-life” societal standings. And so is the remuneration or wage scale.

            The only way to beat that is to get an education and find a fit in an industry and position that will pay a person what they are worth.

            There will always have to be worker-bees, and above them the supervisory-drones, and above them the managers and planners.

            But the people who INVEST into those enterprises expect a positive ROI, and to hedge their bets, they rely on people who study all aspects of the economy.

            What I have found works best for me is to listen to what others have to say and base my own decisions on that, and put my money where my mouth is.

            Some people are born into executive positions, others are groomed, but the bottom line will always be on how to make money for the share holders and owners.

            The US auto industry is fragile because of their own poor decision-making, and fierce competition with a better product.

          • 0 avatar
            EBFlex

            “Ford has been making bad decisions a long time with only Alan Mullaly as a bright spot.”

            Mulally a bright spot?

            He was a complete buffoon. He, like Hack Job, wanted to cut his way to profitability. These quality issues started with him. All he knew was cut, cut, cut.

            The only bright spot was Fields but because he couldn’t clean up Mulallys mess fast enough he was let go.

          • 0 avatar
            highdesertcat

            ” All he knew was cut, cut, cut. ”

            Yup. Sometimes that’s exactly what is needed to move ahead.

            Good stuff happened during Mullaly. After he left, Ford drifted off course again.

            But he did leave the planet with the aluminum-paneled F150. An innovation in itself, drawn from the aircraft industry.

            Mullaly’s forte.

    • 0 avatar
      civicjohn

      @ToolGuy, wasn’t it during the early 2000s when the stacked board approved the $20/ share payout (I forgot exactly which year)?

      So the family banked a ton of cash in the internal (“restructing”) process, I have long forgotten about the payout the shareholders, but IIRC it was a payout in shares (I think). So over the last 2 years, it’s bounced between $8-10/ share. I usually buy some more when it gets to $8, it’s kind of like playing with fire.

      Sometimes I forget that I’m even holding it (I trade my own meager portfolio), but they do have the cash on hand to pay the dividend through 2021, that they have botched the Explorer and Aviator rollout probably falls on management AND the factory workers. At least GM was the first to feel the union burn, so F and FCA should have an easier path to resolve union issues.

      I will say that I had a neighbor who came from Detroit and was working on the Saturn line until they finally flipped it over to the small GMC CUV if I’m not mistaken. His wife took her $20k payout, went to nursing school, and is now a RN at Vanderbilt, making more bank, and if she stays there for 5 years, her kids get to go to Vandy FREE!!!

      I also read a story today where some “expert” analyst says F is a $20 stock. I’ll be dead when that happens…

      There was also a fatality yesterday where one of the striking workers got hit by a car and was killed. Don’t like hearing about stuff like this. God bless his family.

  • avatar
    aja8888

    CFO says: “We have a bias for action and are driving disciplined, long-term execution.”

    What the heck does that mean?

    • 0 avatar
      ToolGuy

      – “Bias for action” generally means you prefer doing something to doing nothing, even if the something is the wrong thing.

      – “Driving” means we are working terribly hard given the huge obstacles we’ve created for ourselves.

      – “Disciplined” means we’re sticking to our plan, no matter how bad it might be.

      – “Long-term” means it might work out.

      All four ‘keywords’ when spoken by the CFO in this context roughly translate to ‘don’t shoot me i’m the messenger’ / ‘don’t pull the trigger on that downgrade just yet’ / ‘giant excuse’.

      Refer to puddleJumper’s comment above.

    • 0 avatar
      indi500fan

      It’s very similar to the NFL coach that says “We’re going to run the ball and stop the run”.

      It just pops out without even having to look at the script. Jargon that will forever be told.

    • 0 avatar
      monkeydelmagico

      We have a bias for pillow action and are driving disciplined, long-stroke execution.

      hold my calls

  • avatar
    TMA1

    “Simply put, we took on too much”

    Not what you want to hear from a company that’s been building automobiles for 100+ years.

  • avatar

    forget the tranny problems, we’ll just stop making cars.

    and there’s any surprise at financials?

  • avatar
    schmitt trigger

    Hackett claimed he wasn’t happy with the media’s view “of the way we’ve worked through this.”
    Translation; we are mad that our shenanigans have been caught.

    “We are laying the groundwork for consistently higher customer experience and future growth in free cash flow and profitability,”
    Translation:…………… Google translate crashed with this one. Too difficult.

    • 0 avatar
      TMA1

      I think he’s saying that Ford customers will have more experiences at the dealership, resulting in greater cash flows and profits as Ford sells replacement parts following the end of their short 36mo/36K warranty. 3 years = the future.

      • 0 avatar
        highdesertcat

        But unless those are proprietary FOMOCO parts, the parts-replacement money COULD go to Autozone, O’Reilly’s, CarQuest, Kragen, NAPA, or any of the local parts suppliers currently in existence.

        Both my 2006 F150 and our 1992 Towncar required a lot of maintenance, repair AND replacement parts. I can’t recall ever having bought a replacement part at the local Ford dealership, but always at Autozone or another local place. And then there’s Walmart, The Supercenter.

        These days, the parts supplier of choice has been RockAuto dot com. They really do have everything a vehicle could ever need.

        • 0 avatar
          ToolGuy

          “They really do have everything a vehicle could ever need.” Except power door lock actuators, and door checks, and dashboard lights, and floormats, and, and, and…

          Let me know how buying dealer-only parts at Walmart works out for you. No, don’t.

          • 0 avatar
            highdesertcat

            “But unless those are proprietary FOMOCO parts”

            Sometimes it helps to READ and COMPREHEND what is being communicated……

            BWHHAHAHAHAHAHAHAHHAHHHAAHAHhhahahahhaa

          • 0 avatar
            ToolGuy

            I’ll have to work on that.

            Are you planning to buy a truck with the largest displacement possible, or are you buying a Rivian?

            Maybe you’ll buy multiples of each? (I’m sure my confusion is down to my poor reading comprehension.)

          • 0 avatar
            highdesertcat

            ToolGuy,

            I have an interest in the Rivian concept. I like it. I think I could make use of it, for local use – not long distance traveling.

            If Tundra is going to downsize the 5.7L to 4.6L as is forecast by certain informed insiders, and if the Rivian proves to be too rich for my idea of value and content, I will buy an F250, 4-doors, 4×4, with the largest gas V8 possible.

            But regardless of what truck I end up with, another Sequoia is in my wife’s future because she loved her 2016 version.

            That’s the story. Now you know why I didn’t type all of that in my comment. It’s too damn lengthy.

  • avatar
    SCE to AUX

    “Flat Rock was not evidence of chaos, it was evidence of us making things right,” he said. Hackett claimed he wasn’t happy with the media’s view “of the way we’ve worked through this.”

    Maybe Elon Musk was right about Ford:
    https://www.thetruthaboutcars.com/2018/06/bad-vibes-ford-takes-tesla-morgue-comment/

    Waahh. Let’s hear it for the ‘established’ car manufacturers.

  • avatar
    Richard Chen

    Just got around to reading NYT’s 2017 writeup about Chicago Assembly’s sexual harassment settlements. Yikes.

    nytimes.com/interactive/2017/12/19/us/ford-chicago-sexual-harassment.html

  • avatar
    tomLU86

    “Flat Rock was not evidence of chaos, it was evidence of us making things right,” he said. Hackett claimed he wasn’t happy with the media’s view “of the way we’ve worked through this.”

    Hackett is lying.

    In any manufacturing organization, rework is waste. You build it correctly the first time. If it can’t be built correctly, you stop and find the cause, correct it, and THEN send it to the next stage.

    This is especially true in auto manufacturing. ALL the car makers have strategies like that in place. Now, the level of execution varies.

    Hackett is saying what he must in order to save face. Or he is ignorant. Or both. The truth is his customers have been compromised.

    They should sell these as used cars.

    • 0 avatar
      AVT

      This. I feel sorry for those who end up with these early examples. Usually people don’t go car shopping by vin (vin will tell you manufacture date) but I can see everyone buying a used one ignoring the 1st production model year like the plague.

  • avatar
    FreedMike

    Reminds me of all the BS senior management used to spout when I worked at WorldCom.

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