Ford cuts forecasts amid China slowdown
Ford lowered its full-year profit outlook after booking weaker earnings in the third quarter, citing slower sales in China and the need to offer bigger discounts in North America among other headwinds.
The setbacks raise the pressure on the carmaker, which is in the middle of an $11bn global restructuring aimed at improving profitability and accelerating its development of electric and self-driving cars.
On Wednesday Ford said it now expected operating profits this year to come in at or below their year-ago level.
The company estimates that adjusted earnings before interest and taxes will be between $6.5bn and $7bn, down from its previous forecast of $7bn to $7.5bn and therefore less than the $7bn in 2018.
It has pulled less profitable vehicles from its North American line-up, eliminated thousands of jobs, marked some plants for closure and expanded an alliance with the German carmaker Volkswagen to share technology and costs.
In the third quarter, North America — Ford’s biggest market — was the lone region to post an operating profit, at more than $2bn.
In Europe, where Ford has said it would cut 12,000 jobs, it recorded an operating loss of $179m. It lost $281m in China.
Jim Hackett, chief executive, said on an earnings call that Ford was “not satisfied” with the company’s performance in China.
Ford has struggled to boost sales in Asia’s largest economy, where automakers have seen demand cool amid an economic slowdown and trade tensions with the US. The company has recently introduced new models in China in hopes of stoking demand, and plans to launch a bevy of electric vehicles over the next few years. Ford has also said it would work to build lower-priced cars in the region.
“Our sales have not come up as fast as we expected them to,” Joe Hinrichs, president of automotive, said.
Ford’s global revenue fell 2 per cent to $37bn in the third quarter. Net income was $425m, or 11 cents a share, compared with $991m, or 25 cents a share, in the same period last year. The results included charges totalling $1.5bn, mainly from restructuring.
On an adjusted basis, Ford earned 34 cents a share. Analysts were looking for 26 cents.
Adjusted earnings per share are seen hitting $1.20 to $1.32 in 2019. The high end of Ford’s previous range was $1.35.
Moody’s last month dropped its rating for Ford’s debt to junk status, citing in part weak earnings and cash generation during the turnround.
Ford said fourth-quarter headwinds have picked up since it provided its last financial guidance, citing increased warranty costs, higher-than-expected incentives in North America and lower volumes in China.
Ford’s incentive spending reached its highest level of the year in the third quarter amid competition for market share in trucks, according to Edmunds. It spent $5,361 on average, up 1.8 per cent year-over-year and above the industry’s average of $4,001.
Mr Hackett attributed the warranty expenses to older vehicles designed earlier in the decade.
Shares in Ford were down more than 2 per cent in after-hours trading.