Detroit automakers ready for challenging year ahead
Another profitable year for Detroit's automakers doesn't mean the year ahead won't pose multiple challenges, leaders of the companies say, even as they expect to keep selling a near-record number of vehicles.
In separate earnings calls over roughly the past two weeks, the three automakers reported drastically different earnings results for 2018. General Motors Co. saw adjusted earnings per share fall 8.3 percent even as its full-year results outperformed expectations; Ford Motor Co. reported its net profit plummeted more than 50 percent last year; Fiat Chrysler Automobiles NV, meantime, rode growing Jeep and Ram sales to a 3 percent gain in profits.
And then the leaders all three automakers warned this year likely would be tougher than last. GM CEO Mary Barra and her team said they were optimistic about the year ahead, despite a growing list of concerns including tariff-and-trade uncertainties, the indefinite idling of five plants in North America, and investments in electrification and autonomous driving.
Ford CEO Jim Hackett told investment analysts that he and his executive team have been working behind-the-scenes since he was appointed in May 2017. This year will bring "execution mode," he promised, as his plan takes hold and the Blue Oval launches new products, continues a $25.5 billion cost-cutting effort, and spends $11 billion to restructure the global business.
By the end of the second quarter, Ford is expected to outline salaried job cuts in North America, Europe and South America. Personnel reductions and reassignments in some areas already have begun, though the actions are expected to gain momentum in the next few months.
Meantime, Fiat Chrysler made $4.1 billion in 2018, the transnational company reported Thursday, a 3 percent increase over last year thanks largely to global sales records from its Jeep and Ram brands. And for the first time in nearly a decade, the automaker will begin paying a dividend to shareholders, CEO Mike Manley said: "2018 was an extraordinary year for FCA. It represents an inflection point for our company."
But its earnings projections for 2019 were worse-than-expected, and its free cash flow was expected to fall to less than $1.7 billion in 2019 from $5 billion in 2018. Manley said the earnings slide in 2019 isn't "life-threatening," but more of a correction after a year of record sales.
Investors punished the Italian-American automaker. Fiat Chrysler shares slid 12.2 percent to $15.23 per share Thursday, outpacing the downshift in the equity markets on renewed fears of a slowdown in global growth and the likelihood that President Donald Trump would not meet with his Chinese counterpart before their March 1 deadline.
"In many ways FCA is a model of success for domestic automakers — its truck and SUV-heavy product lineup not only delivers high profits, but aligns with exactly what consumers want right now," Jeremy Acevedo, analyst with Edmunds, said in a note. "FCA has also done a great job of staggering its product rollouts to keep things fresh for shoppers."
Fiat Chrysler said it made $1.4 billion (1.2 billion euro) in the fourth quarter, up 61 percent compared to a year ago, capping one of its most successful sales years in the U.S. in company history. In the fourth quarter, the automaker's sales rose more than 15 percent on the strength of Jeep and Ram vehicles, though the company did have big fleet sales numbers in the last few months of the year.
Fiat Chrysler reported full-year revenue of $130 billion (115 billion euro), on which it made $2.61 ( 2.3 euro) per share, up 3 percent compared to 2017. The automaker made $7.1 billion (6.23 billion euro) in North America last year, a 19-percent gain. Earnings in North American rose on better mix, higher sales volumes and an increase in product, the automaker said.
In Latin America, the company made $406 million (359 million euro), a 138 percent gain. The company lost $335 million (296 million euro) in Asia, and made $459 million (406 million euro) in Europe, which fell 45 percent compared to a year ago. And the company signaled that this year will again be challenging as new European leadership, appointed in the aftermath of former CEO Sergio Marchionne's death, works to improve business results there.
Fiat Chrysler's financial results for 2018 outperformed at least one crosstown competitor, signaling that its move three years ago to convert U.S. production of cars to SUVs is paying dividends in sales, profits and market share.
Ford late last month said it made $3.7 billion in 2018, a 52 percent slip in profit compared to the year prior, due largely to poor performance from the company's businesses in China and Europe. Still, Ford's U.S. hourly employees will get profit-sharing checks of up to $7,600 based on the company's North American profits.
GM reported Wednesday it made $8.1 billion last year, a massive increase compared to a year ago when the company took charges for exiting Europe. GM employees also will receive profit-sharing checks of up to $10,750 based on the company's North American profits.
Fiat Chrysler — set to cut $6,000 checks to its 44,000 UAW members — slightly revised downward its expectations for the U.S market, predicting sales would track at a strong rate of 17.2 million cars, trucks and SUVs. The automaker does, however, expect to see continued sales growth from its powerhouse Jeep and Ram brands as the Jeep Gladiator midsize pickup and Ram heavy-duty pickups appear in dealer showrooms later this year.