Ford Cites Drag From China, Discounts -- WSJ
October 24 2019 - 3:02AM
Dow Jones News
By Ben Foldy
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 24, 2019).
Ford Motor Co.'s operating profit rose 7.5% in the third quarter
but the auto maker lowered its target for the full year, marking a
setback for CEO Jim Hackett's bid to revive long-term earnings
growth through a broad restructuring.
Ford shares fell about 3% in aftermarket trading following the
report.
The auto maker's dimmer outlook came despite quarterly results
that surpassed analysts' estimates. Ford's operating profit of $1.8
billion for the July-to-September period was buoyed by higher sales
in North America and strength in the company's lending arm.
Looking ahead, the company said the cost of warranty repairs,
weakness in China and tougher competition in trucks and
sport-utility vehicles in North America will prevent its 2019
earnings from hitting a range set in July.
Ford now expects operating income of $6.5 billion to $7 billion
for the full year, compared with its previous projection of $7
billion to $7.5 billion.
Mr. Hackett has told investors that an overseas restructuring
and a redesigned vehicle-development process initiated last year
will start showing results this year. The company is also winnowing
its vehicle portfolio to focus on more-profitable lines, such as
trucks and SUVs in the U.S. and commercial vehicles in Europe.
Finance chief Tim Stone said Wednesday that Ford is having to
spend more on discounts and other incentives for customers as
competition in trucks and SUVs in North America -- the company's
most lucrative market -- is intensifying. He also cited warranty
costs and slumping sales in China, a once-booming market that in
recent years has become a money loser for Ford.
The Dearborn, Mich., car company has struggled with the rollout
of a new Explorer SUV that executives were counting on to boost
second-half earnings. Ford said Explorer sales were down 48% in the
third quarter, a drop it attributed to difficulty overhauling its
Chicago factory to produce the new model. The company's SUV sales
overall fell nearly 11%.
"That was a very challenging launch for us," Mr. Stone said,
adding that output of the SUV is approaching desired levels.
Net income for the third quarter sank to $425 million, from $991
million in the same period last year. The company attributed the
decline to one-time charges for its global restructuring efforts,
including about $800 million in costs related to its joint venture
in India with Mahindra & Mahindra Ltd.
Third-quarter revenue eased to $37 billion from $37.6 billion a
year earlier.
The auto maker's earnings per share, adjusted for one-time
items, registered at 34 cents, beating Wall Street analysts'
average forecast of 26 cents.
Ford narrowed its losses in China to $281 million, from $378
million in last year's third quarter. The company has pared costs
in the world's largest car market, but its sales continued to
decline amid a market downturn that has lasted longer than many
executives and analysts expected.
In North America, where the company has leaned heavily on its
truck business to drive profit, Ford earned just over $2 billion
for the period, up 3% from a year earlier. But its margins on the
continent declined to 8.6% from 8.8%, as the company spent more to
compete with newer pickup truck offerings from General Motors Co.
and Fiat Chrysler Automobiles NV.
Ford trimmed its losses in Europe, as it cut costs and shifted
its focus to commercial vehicles like vans. The auto maker laid out
plans this summer to close six factories in Europe and eliminate
12,000 jobs in hopes of turning a profit in the region.
While warranty costs are rising for older vehicles, improved
quality control should lower such expense in coming years, Mr.
Stone said.
--Mike Colias contributed to this article.
Write to Ben Foldy at Ben.Foldy@wsj.com
(END) Dow Jones Newswires
October 24, 2019 02:47 ET (06:47 GMT)
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