Ford Swings to $800 Million Loss --Update
January 26 2017 - 09:01AM
Dow Jones News
By Christina Rogers
Ford Motor Co. swung to a net loss of $800 million in the fourth
quarter of 2016, as special charges related to the company's
pension plans and the cancellation of a plant in Mexico
overshadowed strong operating results in North America and
improving profitability in Europe.
Revenue for the just-ended quarter fell 4% to $38.7 billion on
lower global wholesales, including a U.S. sales decline of 2%
during the period. Fourth-quarter operating profits were down 20%
to $2.1 billion as the company also faced headwinds in China, where
new-car pricing continues to weaken.
Adjusted earnings were 30 cents per share in the fourth quarter,
a 1-cent miss from Wall Street expectations of 31 cents a
share.
The No. 2 U.S. auto maker reported full-year operating results
of $10.4 billion in 2016, slightly ahead of guidance and the auto
maker's second best pretax result in history.
Company executives had hoped to deliver another record year in
2016, but in September Ford cut full-year guidance after announcing
it would take a $600 million charge related to an expanded safety
recall.
Ford's full-year net income of $4.6 billion, down 60% over the
prior-year, was dented by a hefty $3 billion special-item charge
booked in the fourth-quarter related to a remeasurement of the
assets and obligations in retiree-benefit plans. Ford also took a
$200 million charge in the same quarter on the cancellation of its
assembly plant in Mexico, which it started construction on in the
summer.
Company executives have signaled 2017 will be a year of
transition for the Dearborn, Mich., auto maker, marked by a heavy
investment in new technologies and initiatives that will help the
company diversify beyond its core auto-making business and enter
new transportation-related services.
"We're still expecting strong results in 2017 but we do expect
results to be lower for the company," said Ford Chief Financial
Officer Bob Shanks.
Mr. Shanks said he is encouraged by President Donald Trump's
proposed economic policies but says it is too early to tell how his
agenda will impact Ford's bottom line. In preparation, the company
has begun to model the impact of Mr. Trump's proposed corporate tax
plan on future earnings internally, he added.
"We have seen a very positive response from the market," Mr.
Shanks said.
Ford is coming off one of its most profitable periods in history
with North America -- by far its biggest moneymaking region --
benefiting from two consecutive years of record U.S. car and truck
demand.
Operating profits for Ford's North American operations were
$1.96 billion in the fourth-quarter, about flat with the same
period a year ago, and about $9 billion for the full-year 2016. As
part of the company's profit-sharing formula, which is based on
North American results, Ford's 56,000 union-represented workers
will each receive a $9,000 bonus check in March.
While Ford continues to benefit from strong pricing on its big
pickups and SUVs -- average transaction prices rose $1,400 per
vehicle in the fourth quarter -- slumping passenger-car demand in
the U.S. and rising incentives remain a drag on North American
operating results, which account for nearly 90% of company
profits.
Operating margins also slipped in 2016 to 9.7% in the company's
core North American operation due to the recall charge in the
third-quarter and lower dealers stocks at the end of the year.
In Europe, Ford posted an operating profit of $166 million
compared with $133 million in the same year-ago period. The
company's recovery in the region continues to gain steam,
sidestepping currency declines and softer sales in the U.K. tied to
the Brexit impact.
In Asia Pacific, Ford recorded a $284 operating profit, down
from $444 million a year ago, as the auto maker continued to
struggle with cooling new-car demand in China, the world's largest
auto market. Fourth-quarter margins in Asia Pacific fell to 8.4%
from 13.1% a year ago.
Ford's operating losses in South America are starting to level
off. It reported $293 million in red ink for the just-ended
quarter, compared with $295 million in the same year-ago period.
Mr. Shanks says the region's market is showing signs of bottoming
out and the company expects a turnaround this year.
Write to Christina Rogers at christina.rogers@wsj.com
(END) Dow Jones Newswires
January 26, 2017 08:46 ET (13:46 GMT)
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