F Ford Motor Company

By Mike Colias 

Ford Motor Co.'s bottom line last year suffered amid worsening losses in China and Europe, underscoring the urgency of the company's planned overseas restructuring and the pressure on its strong U.S. business to keep producing.

Ford's North American business and lending arm in 2018 generated $10.2 billion in operating income, which is adjusted for one-time items. But the company lost money in every other region where it does business, including heavy losses in China, dragging down its overall operating income to $7 billion, a 27% drop from 2017.

Chief Executive Jim Hackett's turnaround plan hinges on restructuring weak parts of the business around the globe, including in China and Europe, while betting bigger on trucks and SUVs in the U.S. He is counting on the U.S. business to remain resilient while industry sales are expected to pull back from historically high levels this year, as higher interest rates and rising new-vehicle prices make it harder for consumers to afford new wheels.

Ford is embarking on an $11 billion restructuring of its overseas businesses that is expected to last several years. The Dearborn, Mich., auto maker is also slashing a cumulative $25.5 billion in costs by 2022 while overhauling its lineup of vehicles in most major markets after letting some of them age for longer than they should have, executives have said.

Still, analysts have expressed frustration with the pace of Mr. Hackett's turnaround effort and have said he should offer more specifics about the plan. Ford's struggles have invited closer comparisons to the performance of rival General Motors Co., which has sustained strong profits over the past few years while Ford's earnings have contracted.

Ford's cost-cutting effort is aimed at reversing its declining operating-profit margin, which fell to 4.4% last year, from 6.1% in 2017. GM's margin, meanwhile, topped 8% through three quarters of last year. GM reports full-year financial results Feb. 6.

Ford shares tumbled last week after the company declined to give specific profit guidance for 2019. Some analysts said the effect of the cost cuts has been slow to show up in Ford's bottom line. Meanwhile, GM's shares rallied after that auto maker said it expects to grow the bottom line this year.

"Ford has been a whole lot of talk and not too much concrete action compared to GM," Evercore ISI analysts wrote in a Jan. 16 client note.

Ford financial chief Bob Shanks on Wednesday reiterated that 2019 could be an improvement over last year, but that many variables remain out of the company's control, including trade uncertainty and commodity costs.

"The external environment has been quite volatile. Policy matters have been unpredictable," Mr. Shanks told reporters Wednesday, noting that tariffs cost the company more than $750 million last year.

He also cited the risk of the U.K. leaving the European Union without a trade deal, which he said would hurt Ford's substantial manufacturing and sales operations in the country.

Ford's fourth-quarter operating income adjusted for one-time items totaled $1.5 billion. Net income for the quarter swung to a loss of $116 million, from a $2.5 billion profit in the same period a year ago. The company attributed the decline in part to a $900 million, noncash hit to the value of its global pension plans that was driven by the stock-market downturn late last year. Revenue totaled $41.8 billion.

Fourth-quarter earnings per share were 30 cents, below the 32 cent average forecast of Wall Street analysts. Ford had disclosed the fourth-quarter EPS results during a presentation to analysts last week.

Ford shares fell 39% last year. They closed Wednesday at $8.34, up 9% for 2019.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

January 23, 2019 18:41 ET (23:41 GMT)

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