By Mike Colias
Ford Motor Co. said fourth-quarter operating income sank by
two-thirds, and it issued a lower-than-expected profit outlook for
2020, the latest signs of trouble for Chief Executive Jim Hackett's
turnaround plan.
Ford said operating income for the October-to-December period
was $485 million, down from $1.5 billion a year earlier. Earnings
per share adjusted for one-time items were 12 cents, well short of
analysts' estimate of 17 cents a share.
The company's financial standing has continued to weaken under
Mr. Hackett, who was brought in nearly three years ago to revive
the auto maker's profit growth and give it a stronger vision for
the future.
Ford's net income for the full year fell to just $47 million --
down from $3.68 billion in net income a year earlier -- mostly due
to restructuring costs in Europe and adjustments to global pension
plans.
Revenue for the full year fell 3% to $155.9 billion.
Ford shares fell around 10% in after-hours trading. They are
flat for the year, closing at $9.17, and down about 17% since Mr.
Hackett took over as CEO in May 2017.
"Financially, it wasn't OK," finance chief Tim Stone said of the
2019 results during a discussion with reporters at Ford's
headquarters. "Strategically...I think we made strong
progress."
Ford pinned the shortfall in part on lower production volumes in
North America stemming from problems with launches of key models,
including the redesigned Explorer and Escape sport-utility vehicles
and its Super Duty pickup truck. It also cited higher warranty
costs and a bonus payout to United Auto Workers that totaled about
$600 million.
Ford booked a net loss of $1.67 billion for the quarter which it
attributed to higher contributions to its pension plans overseas.
Revenue fell 5%, to $39.7 billion.
The auto maker forecast operating profit this year of $5.6
billion to $6.6 billion, compared with $6.38 billion last year.
That equals an earnings-per-share range of 94 cents to $1.20, which
is lower than the average analysts' estimate of $1.30, according to
S&P Global Market Intelligence.
Mr. Hackett's strategy to revitalize Ford -- which includes a
multiyear, multibillion-dollar restructuring -- hasn't returned the
company to earnings growth or restored profitability overseas,
where Ford is closing plants and shedding thousands of workers to
cut costs. Ford's operating profit has fallen in both full years of
his tenure.
This year "will be crucial for Ford, as it must show better
results" from Mr. Hackett's revitalization plan, Credit Suisse
analyst Dan Levy wrote in an investor note Tuesday. "Ford must
start meeting/exceeding investor expectations to reinvigorate
investor interest."
Ford executives said the company continues to restructure the
business to reduce costs and focus on more profitable parts of the
business. But they acknowledged disappointment in its
implementation of production schedules.
"Financially, the company's 2019 performance was short of our
original expectations, mostly because our operational execution --
which we usually do very well -- wasn't nearly good enough," Mr.
Hackett said. "We recognize, take accountability for and have made
changes because of this."
A year ago, Mr. Hackett was frank about his disappointment with
results from 2018, telling staffers in a memo that he was angry
about the mediocre results and advised employees to "bury the year
in a deep grave" and focus on 2019, The Wall Street Journal
reported.
Under Mr. Hackett, Ford has pursued futuristic initiatives, such
as testing driverless pizza delivery and an all-electric SUV
version of the Mustang muscle car. But it has also been consumed by
present-day problems that have weighed on earnings.
The second half of Ford's year was plagued by higher warranty
costs and a troubled rollout of a redesigned version of its
Explorer sport-utility vehicle, one of its key models. Ford
executives have said the rollout plan for the SUV, built at its
renovated Chicago assembly plant, was overly aggressive and delayed
the launch last fall.
In China, where car companies have been hurt by the first sales
decline in decades, Ford has struggled more than most. Its sales
there have fallen by more than half since 2016. Company executives
have said Ford didn't update its vehicle lineup quickly enough to
keep pace with Chinese tastes.
In a bright spot for the year, Ford trimmed its losses in
overseas markets. It halved its China loss, to $771 million, from
$1.55 billion, which it attributed to cost cutting. In Europe, the
company had a $47 million loss for the year, down from a $398
million loss a year earlier.
The troubles abroad have left Ford to lean heavily on profit in
two areas: the strength of its F-series line of pickup trucks in
North America and income from its lending arm, Ford Motor Credit,
which accounted for nearly half of Ford's operating profit in 2019.
That has risen steadily from about 20% in 2013.
Investors want to see Ford return other parts of its business to
profitability while its North American business remains healthy,
Credit Suisse's Mr. Levy wrote.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
February 04, 2020 18:41 ET (23:41 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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