Ford Motor Co. will continue to face major challenges in the first half of 2015, but the company’s executives expect better results for the full year after a disappointing 2014.
The company’s results fell in line with earlier guidance, but the net income of $3.2 billion for 2014 is down $4 billion from last year. The obvious hit resulting from the lower profits? Profit sharing checks for the company’s more than 50,000 hourly employees in the U.S.
They are expected to collect an average of $6,900, which is nearly $2,000 less than last year’s record payout of $8,800 to 47,000 workers. That said, it’s an improvement over 2005 through 2008 when no profit sharing checks were issued.
Bob Shanks, Ford chief financial officer, said the company anticipates lower margins in the first quarter and then we’ll start to recover as the company completes the changeover of a key plant in Kansas City.
“We are expecting some growth for the industry,” Ford Chief Executive Mark Fields told analysts and reporters during a conference call. “The industry has run under replacement demand for five years. We really don’t know the impact of lower oil prices. We think (lower oil prices) are positive for the economy and positive for the consumers.”
That said, Ford might sell fewer trucks this year in the oil patch states such as Texas and Oklahoma, he noted.
(Ford takes Q4 hit due to F-Series changeover. For more, Click Here.)
Fields said Ford expects the U.S. economy to grow by 3%, while China’s economy will expand by 7% to 7.5% and India’s by 6%.
“We expect no to be strongly profitable with 8% to 9% margins,” he said. However, the downtime at the maker’s Kansas City plant needed to get ready for the new F-Series will have an impact on the first quarter as well preparations for the launch of the 2016 Ford Edge and 2016 Ford Explorer, which are due out later this year, according to Ford executives.
Fields also emphasized that Ford was “exactly on plan with the F-150 launch. We’re almost through the acceleration curve at the Dearborn plant. Kansas City is on plan. We are seeing very strong demand for the (new) F-150. We could have our best January sales since 2004. The mix is very strong. It’s very, very encouraging,” he added.
If the company’s luck had been a little better in relation to the falling gas prices, it may been a different financial story this year.
(Click Here for details on FCA’s recent earnings.)
“The market shift toward trucks and SUVs happened ahead of Ford’s ability to fully leverage it. The F-150 began transitioning to its all-new version in the latter part of 2014, and the redesigned Edge and Explorer won’t be available until well into 2015. Despite the timing on these new models Ford held steady in 2014 and is well positioned for 2015 and beyond,” noted Karl Brauer, a senior analyst with Kelley Blue Book.
“The competition in these segments is only increasing, but Ford’s market share and brand recognition is well established. With the F-150 reaching full production in the coming weeks, supplemented by the all-new Edge and Explorer entering showrooms Ford will see higher volumes in these hot segments,” he said.
(To see how the winter storms on the East Coast will impact sales, Click Here.)
Ford, however, still faces major challenges in Europe, South America and Asia Pacific outside of China. It’s losing money in all three areas and the rising value of the dollar and the crisis in Russia have made the problems more complex.
“We’ve had some success in Europe. We increased our share. The investment we made in commercial vehicles is paying off and we’ve made progress on cost. We’re impacted by the lower discount and the situation in Russia. Our objective is to profitable as soon as possible,” Fields said, adding he expects the company’s problems in Russia to continue in 2015.
“2014 was a solid yet challenging year for Ford — with our investments and a record number of new products launched around the world positioning us for strong growth this year and beyond,” Fields insisted “The entire Ford team remains focused on our three priorities of accelerating our One Ford plan, delivering product excellence and driving innovation in every part of the business.”
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