October 24, 2018 22:15 CET
DETROIT — Poor results in China and Europe contributed to a 37 percent drop in third-quarter net income for Ford Motor, and the automaker backed off its goal of raising its global profit margin to 8 percent by 2020.
But the automaker’s top executives on Wednesday continued to stress patience to investors as CEO Jim Hackett’s $11 billion restructuring plan starts to take hold.
Ford reported on Wednesday that its net income fell to $991 million in the quarter, although revenue rose 3 percent to $37.6 billion, driven by higher-profit vehicles in North America including the redesigned Expedition and Lincoln Navigator SUVs. Ford’s earnings before interest and taxes fell 27 percent to $1.7 billion.
“We’ve had an extremely productive quarter in terms of putting building blocks in place,” Hackett said on a conference call. “We’re addressing real issues and we’re moving quickly to redesign the business in support of our stated strategy.”
But Ford said its challenges overseas, as well as higher costs and uncertainty clouding the entire auto industry, mean it no longer forecasts achieving the 8 percent profit-margin target it set previously. CFO Bob Shanks declined to offer an alternate timeframe for reaching that threshold.
“We don’t see, at the moment, a way to get there,” Shanks told analysts. “Certainty we’re trying to get there as fast as we can. I’m not going to put a timeframe on it because I don’t want to go back and have to change it.”
Hackett and his leadership team have faced scrutiny from Wall Street analysts who have asked for more clarity regarding his plan. Hackett on Wednesday said the details would be shared over time.
“We’re fully committed to sharing details as soon as we can, but I can’t allow us to get ahead of the process,” he said. “The need to get our stakeholders up to speed is the priority for me and the entire company.”
Ford’s profits in the quarter were driven by North America, where earnings rose 7.5 percent to $1.96 billion. Its profit margin for the region was unchanged from the same period a year ago at 8.8 percent.
The automaker said its market share in the region was down slightly because it was discontinuing sedans, but market share for its profitable F-series pickups increased.
Hackett said those results “demonstrate early evidence that fitness actions are now taking hold.”
Ford’s profit margin for the quarter was 4.4 percent, down 1.9 percentage points compared with the same period a year ago.
Ford posted lower revenue, market share and sales in China, the world’s largest vehicle market.
Ford lost $208 million in Asia Pacific in the quarter. Excluding China, it made $170 million in the region with profit margins of 9 percent.
The automaker is suffering from a lack of new product there that has led to a sharp decline in sales. New-vehicle sales fell 43 percent in September from a year earlier and are down 30 percent through the first nine months of the year.
Ford on Tuesday said it would separate its China business into a standalone unit and appointed Anning Chen, a former Ford executive with 25 years of industry experience, to become CEO of Ford China on Nov. 1.
Ford lost $245 million in Europe, up from a loss of $192 million in the same quarter last year. This was due to weakness in Turkey and Russia, and launch-related costs for the latest Focus compact car, Ford said. The company said revenue in the region increased due to higher volume and net pricing driven by new products.
Volume up in most major markets but this was offset partially by large decline in Turkey, Ford said. The compay’s sales in Turkey fell 25 percent through August in a total market down 21 percent.
In Russia, Ford’s sales were flat in September in a market up 6 percent.
In other regions, Ford lost $152 million in South America, down 1 percent. It made $47 million in the Middle East and Africa.
Ford said its mobility unit lost $196 million in the second quarter, $124 million more than it lost during the same period a year ago. The unit is in a heavy investment phase that has little offsetting revenue.
Ford Motor Credit made $678 million, its best quarterly results since 2011.
Ford’s net income equaled 29 cents per share, 1 cent higher than the consensus estimate on Wall Street.
The company reaffirmed its full-year target of adjusted earnings per share of $1.30 to $1.50. It had previously lowered its guidance from a range of $1.45 to $1.70 per share, citing troubles in Europe and China.
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