Ford Takes a Third-quarter Hit, Top Brass Talk Botched Explorer Launch
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.”
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“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.
Reminds me of all the BS senior management used to spout when I worked at WorldCom.