Ford Motor Co. profit down 39 per cent in first quarter
The Ford logo is seen on cars for sale at a Ford dealership, July 1, 2012. (AP / Seth Perlman)
Dee-Ann Durbin, The Associated Press
Published Friday, April 25, 2014 8:52AM EDT
Last Updated Friday, April 25, 2014 1:50PM EDT
DEARBORN, Mich. -- Ford Motor Co.'s worldwide sales rose in the first quarter, propelled by growing strength in Asia and Europe. But weakness in North America dragged down the company's profit.
Its earnings missed Wall Street's expectations, while revenue beat them. Ford shares fell three per cent in morning trading.
Also Friday, CEO Alan Mulally said on a conference call that there is no change in the plan for him to stay with the company at least through the end of this year. Mulally, 68, told reporters and analysts on a conference call that the company doesn't comment on speculation and that he's pleased with the company's planning for his departure.
In 2012, Ford named former North America chief Mark Fields as Chief Operating Officer to handle day-to-day duties, and Fields became the heir apparent to take over for Mulally. There have been reports recently that Mulally plans to leave the company sooner than expected and that Fields would become CEO.
Ford's first-quarter net income fell 39 per cent to $989 million, or 24 cents per share, down from $1.64 billion, or 41 cents per share, in the January-March period a year ago.
Excluding a one-time charge of $122 million for plant closings in Europe, Ford earned 25 cents. That was far short of Wall Street's expectations. Analysts polled by FactSet forecast earnings of 31 cents per share.
Revenue rose slightly to $35.9 billion, beating analysts' expectations for $34.2 billion. Worldwide sales were up 6 per cent to nearly 1.6 million.
Ford's U.S. sales fell three per cent to 580,260 in the January-March period, the victim of bad weather and low buyer interest in smaller, fuel efficient cars like the Focus and C-Max hybrid. While the F-Series pickup continued to see gains, sales of other key vehicles like the Fusion sedan and Escape SUV were down.
Ford's Chief Financial Officer Bob Shanks said Ford had forecast lower sales in North America this year as it launches 16 new vehicles in the region.
But Ford made up for those losses elsewhere. In China, first-quarter sales soared 45 per cent to 271,321 vehicles. And European sales, long a sore point for Ford as Europe went through a recession, rose 11 per cent to 326,000.
Ford's Asia Pacific operations continued to thrive under the company's ambitious expansion plans, but Ford sputtered in North America and lost money in South America and Europe. A newly created Middle East and Africa region was profitable.
North American pretax profit fell 37 per cent to $1.5 billion. Ford said its North American operations were hit with $100 million in weather-related charges during the brutal winter, including increased costs for parts shipments.
The company also took a $400 million charge for warranty reserves and repair costs. Shanks said Ford regularly forecasts what its future warranty and recall costs will be and sets aside money for them. The company said those costs have been rising, so it decided to add $340 million to its reserves this quarter for vehicles from the 2008 through 2013 model years. Ford said the decision wasn't related to the spate of first-quarter recalls at rival General Motors Co.
Ford also spent $60 million on two recalls this quarter. Revenue in the company's most profitable region fell five per cent to $20.4 billion.
Ford's Asia Pacific region posted a record $291 million pretax profit, reversing a $28 million loss from a year ago. Revenue jumped 18 per cent to $2.6 billion. The new Middle East and Africa region reported a $54 million profit.
The company cut its European losses by more than half, but it continued to struggle in South America. Ford lost $194 million in Europe as costs fell and overall sales improved. In South America, the loss more than doubled to $510 million as industry sales dropped and Ford accounted for the effects of unfavourable currency exchange rates.
Dearborn, Mich.-based Ford enjoyed one of the best years in its history in 2013, with a pretax profit of $8.56 billion. But it had warned that this year would be leaner as it launches a record 23 vehicles worldwide and seven plants, including four in China. It anticipates 13 weeks of expensive down time -- up from five in 2013 -- at its two U.S. pickup truck plants to prepare for the launch of a new aluminum-clad F-150. The truck goes on sale later this year.
Ford says it still expects a full-year pretax profit between $7 billion and $8 billion.
Its shares fell 48 cents, or three per cent, to $15.83 in morning trading. Its shares are up more than 17 per cent over the past year.