Ford falters, warns worse could come
DEARBORN, Mich (AP):
Ford Motor Co's shares tumbled on Thursday after it reported weaker-than-expected second-quarter earnings and warned that things could get worse in the second half of the year.
Ford's net income fell nine per cent to US$2.0 billion in the second quarter as the company struggled with flattening US sales and a tougher market in China.
The Dearborn, Michigan, based company said its full-year guidance, which calls for a pretax profit of US$10 billion to US$11 billion, remains intact but is at risk. Among the looming issues in the second half of this year are the expensive launch of Ford's new aluminum-sided Super Duty pick-up truck and an expected US$145 million hit to sales in Britain because of its vote to leave the European Union.
The automaker's shares fell US$1.13, or 8.2 per cent, to finish at US$12.71 Thursday.
Ford CEO Mark Fields said the company will take actions to improve its results, including cutting production to meet demand and making sure all markets have the right mix of vehicles.
"It's kind of like when you're having a bad golf game you just play through it," he said.
It wasn't the result many had expected. After Ford's chief rival General Motors Co reported last week that its second-quarter profit more than doubled to US$2.87 billion, many analysts thought they would hear similar good news from Ford.
There was some good news. Because of its strong first quarter Ford still managed to a record first-half operating profit of US$6.8 billion. In Europe - long a trouble spot for the company - second-quarter sales rose 11 per cent and pretax profits nearly tripled to US$467 million, thanks in part to stronger sales in Russia.
However, Ford also fed into many investors' lingering worries about slowing US sales and market pressures in China. "They're trying to underpromise and overdeliver for the back half of the year," said James Albertine, an auto analyst with Consumer Edge Research.
Ford's results reflected some Ford-specific problems, like the Super Duty launch. But its warnings about US sales could dampen the whole industry. Ford's chief financial officer, Bob Shanks, said after an unprecedented growth streak the US market is starting to plateau. Pretax results in the region fell 5 per cent to US$2.7 billion.
Ford's North American sales were flat from a year ago, and Ford's market share in the region didn't budge despite a big increase in incentive spending. Ford spent US$3,475 per vehicle on incentives, compared to US$2,700 in the same quarter last year, according to estimates from Kelley Blue Book.
"We don't see growth, at least in the near term," Shanks said. Ford lowered its estimates for full-year industry sales in the US.
There were other storm clouds. Shanks said Britain's exit vote will likely cost the company US$400 million to US$500 million annually in lower sales and weaker currency until the exit is completed. There's too much uncertainty to predict much after that, Shanks said, but the company is considering how to mitigate its risks. Ford is the top-selling brand in the UK and has engine and transmission plants there.
In Asia, Ford recorded its first pretax loss (US$8 million) in more than three years. Shanks said Ford sold fewer commercial vehicles in China and spent heavily on engineering and warranty costs. The weaker yuan also impacted sales of its luxury Lincoln brand.
Ford's losses in South America also more than doubled to US$265 million because of continuing economic issues in the region.