Cost challenges: A Ford F-150 pickup truck on the assembly line at Dearborn Truck Plant in Michigan. Sales of F-Series pickups, which Ford sells to many fleet buyers, rose 4.2% in the quarter to nearly 200,000 vehicles. — AFP
NEW YORK: Ford Motor Co says full-year earnings would be at the low end of its forecast as the carmaker struggles with warranty costs and supply disruptions tied to recent hurricanes.
Adjusted earnings before interest and taxes this year will be about US$10bil, down from a previous outlook for as much as US$12bil, the company said on Monday. Analysts had expected US$10.6bil.
The tempered outlook highlights the widening gap between the Dearborn, Michigan-based carmaker and competitors, including cross-town rival General Motors Co (GM).
Tesla Inc shares soared last week after reporting a blowout third quarter, while GM raised its full-year profit forecast for the third time this year.
“We need to move faster, bottom line, and warranty needs to be a big part of that,” Ford chief financial officer John Lawler said on a conference call with analysts. “We need to accelerate our pace to outrun what our competitors are doing.”
Ford’s shares fell 6.1% in after-hours trading. If the decline holds, it would be Ford’s biggest drop since Aug 2. The stock has already fallen 7% this year.
Third quarter adjusted profit was 49 US cents a share, matching analyst estimates. The quarterly results and updated outlook were “underwhelming”, Vital Knowledge analyst Adam Crisafulli said in a note to clients, “especially compared to the strong reports from GM and Tesla.”
In July, Ford’s shares went into a tailspin after the automaker reported a surge in warranty costs that caused it to fall short of profit estimates.
Chief executive officer Jim Farley has taken drastic action to remedy the repair woes, even forgoing near-term profit by holding thousands of new models in parking lots around Detroit for extra quality checks.
In a call with reporters, Lawler characterised the quarter as “solid”, citing revenue that grew 5% to US$46.2bil.
But he said the company continues to struggle to get costs under control, especially the expense of repairing quality problems on its vehicles.
“Our warranty costs were a slight improvement” in the third quarter, Lawler said. “But it’s not as big as we would like to see and we’re going to continue to work for that to be a much bigger number.”
The ongoing cost challenges blunted signs of progress elsewhere.
The Ford Pro commercial business, which has been a solid source of profit, earned US$1.8bil before interest and taxes, up from US$1.65bil a year earlier.
Sales of F-Series pickups, which Ford sells to many fleet buyers, rose 4.2% in the quarter to nearly 200,000 vehicles.
In Ford Blue, its traditional business that includes internal combustion engine vehicles and petrol-electric hybrids, Ford earned US$1.6bil before interest and taxes, less than the US$1.72bil it made last year when it was hit by a strike by the United Auto Workers.
Ford now expects the unit to earn US$5bil before interest and taxes this year, down from as much as US$6.5bil in its prior forecast.
Supply disruptions from the recent hurricanes that hit the Southeastern US, along with higher manufacturing costs and adverse exchange rates, contributed to this year’s decline, the company said.
Ford’s Model e plug-in business lost US$1.2bil and faced pricing pressure in the third quarter, the company said.
Ford is scaling back its electric vehicle investments as mainstream buyers balk at pricey battery powered models and fret about a spotty charging infrastructure.
In August, Farley pulled the plug on an electric three-row sport utility vehicle the company had in the works.
“There’s been a lot of frustration by investors,” David Whiston, a Morningstar Inc analyst, who rates Ford the equivalent of a “buy”, said before the results were released.
“The stock has languished for many, many years.” — Bloomberg
