Weak North American results push Ford profit down 39% in Q1
Automaker's first-quarter net income fell to US$989-million from US$1.64-billion in 2013
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’s first-quarter net income fell 39 per cent to US$989-million, or 24 cents per share, down from US$1.64-billion, or 41 cents per share, in the January-March period a year ago.
Excluding a one-time charge of US$122-million for plant closings in Europe, Ford earned 25 cents per share.
That was far short of Wall Street’s expectations.
Analysts polled by FactSet forecast earnings of 31 cents per share.
Revenue rose slightly to US$35.9-billion, beating analysts’ expectations for US$34.2-billion.
Worldwide sales were up six per cent to nearly 1.6 million units.
Ford’s United States 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 US$1.5-billion.
Ford said its North American operations were hit with US$100-million in weather-related charges during the brutal winter, including increased costs for parts shipments.
The company also took a US$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 US$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. (GM).
Ford also spent US$60-million on two recalls this quarter.
Revenue in the company’s most profitable region fell five per cent to US$20.4-billion.
Ford’s Asia Pacific region posted a record US$291-million pretax profit, reversing a US$28-million loss from a year ago.
Revenue jumped 18 per cent to US$2.6-billion.
The new Middle East and Africa region reported a US$54-million profit.
The company cut its European losses by more than half, but it continued to struggle in South America.
Ford lost US$194-million in Europe as costs fell and overall sales improved.
In South America, the loss more than doubled to US$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 US$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 US$7- and US$8-billion.
The same day the automaker announced its financial results, CEO Alan Mulally said 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.