Ford makes $2B in second quarter, up 3.7%
Dearborn — Ford Motor Co. delivered a $2 billion profit and second-quarter earnings that beat expectations. The announcement Wednesday comes as new CEO Jim Hackett assesses the fitness of his company in an industry where consumers aren’t buying sedans and Silicon Valley ups its game in the auto sector.
That profit, which is 3.7 percent higher than a year ago thanks largely to a tax adjustment, came before Hackett has had the chance to change much. He’s in the middle of a 100-day examination meant to figure out how to boost revenue, trim unneccessary positions or products, innovate and change the company culture.
During his call with investors Wednesday, Hackett made clear that Ford has had to remake itself many times, but said the 114-year-old company several things in its favor: brand loyalty, quality products, and momentum from sales and transaction prices in the truck and SUV segments.
“Surprisingly, in a company like Ford, all the talent is here (to innovate),” he said. “All the capability is here. We’ve got some early momentum here.”
Hackett and Ford CFO Bob Shanks said further changes will come later this year. Hackett has already streamlined the executive team, and freed about 30 minutes a day from executive calendars to allow for real work, he said, not corporate requirements.
Since Hackett replaced Mark Fields in May, Ford has offered buyouts to 1,400 white-collar employees and said it plans to move production of the next-generation Focus to China by 2019.
The North American automotive segment’s revenue was up 3 percent year over year to $24.5 billion, though the pre-tax profits slipped $500 million to $2.2 billion. Ford also saw a decrease in market share due to lower fleet sales. The company saw its ninth consecutive profit in Europe, though revenue and profits slipped compared to a year ago due to Brexit. Ford also saw wholesale volume grow 7 percent in its Asia Pacific operations. Revenue grew 21 percent there to $3.4 billion, and profits increased $151 million from a year ago to $142 million.
Meanwhile, the company adjusted its full-year guidance at the midyear point. Ford projects it will post adjusted earnings per share of $1.65 to $1.85, a higher range than what was originally forecast due to an adjusted tax rate. Bob Shanks, Ford chief financial officer, said if that the original forecast had used that new tax rate, it would have been $1.58 per share.
Analysts indicated the adjusted earnings per share weren’t much to get excited about, because they came about by tax adjustments. Ford stock was down about 2 percent to $11.03 at 3:20 p.m. Wednesday.
Executive Chairman Bill Ford Jr. said when he appointed Hackett that the tech-talking “change agent” would “re-energize” the company by moving faster than his predecessor, Fields, in realigning the business to maximize growth amid expansion into new markets such as self-driving vehicles, electrification and mobility — sectors in which profits eluded Fields.
Hackett provided few details about his plans Wednesday, because his assessment isn’t finished. Outside of instilling a design-thinking culture within the company, he and Shanks said they are taking hard looks at every part of the company.
Shanks said Ford will respond to what customers want moving forward, meaning the company will invest more in trucks and SUVs, and “be very thoughtful” about investments in the car lineup.
“As I came into the job, I knew we were in the middle of (deciding whether to eliminate any vehicles),” Hackett said. “There’s been some decisions that have been in the air.”
Said Shanks: “We’re going to look all the individual vehicles lines with a very critical lens as we go forward, because we’ve got to make a return on that investment.”
The share price, which has been stagnant through most of Ford’s big announcements in the last year, will react once Ford begins to get things done, Hackett said
On Tuesday, General Motors Co. reported net income of $1.66 billion in the second quarter, down 42 percent from a year ago, primarily driven discontinued European operations. Fiat Chrysler Automobiles NV is expected to report its second-quarter results on Thursday.