Just about any way you look at it, the second quarter was a good one for Ford Motor Co., the second-largest domestic automaker not only handily beating Wall Street analysts’ forecasts but delivering record numbers in North America and Asia/Pacific.
Even Europe came close to breaking even after years of heavy losses, noted Ford President and CEO Mark Fields. All told, the maker delivered net income of $1.9 billion per share, a 44% or $544 million year-over-year rise. On a per-share basis, Ford made 47 cents. That was up seven cents per share compared to the second-quarter of 2014 – and 10 cents more than the Wall Street consensus forecast.
“We delivered an outstanding second quarter, a great first half of 2015, and we are confident the second half of the year will be even stronger,” declared Fields in a prepared statement accompanying the earnings report. “The entire Ford team is focused on accelerating our One Ford plan, delivering product excellence and driving innovation in every part of our business.”
Revenue also exceeded expectations for the quarter at $37.3 billion compared to a $35.34 billion estimate, according to Thomson Reuters. Ford revenues were $35.37 billion a year ago.
The surge was driven by a wave of new products that ranged from the redesigned Ford Mustang to the new “aluminum intensive” F-150 pickup. Many observers had questioned the wisdom of shifting away from a conventional steel body to the lighter, more fuel-efficient truck, but Ford claims demand is so strong it is having trouble building enough F-150s to stock dealer inventories.
It also helped that U.S. buyers are loading the pickup – and other models up with every conceivable option. According to industry data, TrueCar.com reported last month saw the price of vehicles, overall, hit a new U.S. record. Ford this month announced it will launch an even more up-market version of the F-150 that will push into the $60,000 range.
Overall, the second quarter saw Ford deliver its best automotive quarterly profit since 2000. North American earnings, meanwhile, reached a pre-tax record $2.6 billion, up $157 million from what had been the previous record set between April and June 2014. Margins also rose to a record 11%.
Ford set another record in the Asia/Pacific region with pre-tax earnings of $192 million up $33 million year-over-year. Revenue, however, was down 15% due to a slide in sales, to $2.4 billion. The maker credited lower costs and favorable exchange rates for the strong profit.
Europe still operated in the red, but cut its deficit in half, to $14 million, with sales rising 3%. The maker said its pre-tax loss for the full year “is expected to improve,” but getting back in the black still appears an elusive goal.
There were a few concerns raised by the earnings report. The maker’s Chinese sales, after a period of rapid growth, flattened out during the first half of the year. And Ford warned that the country’s once-booming car market is likely to see auto sales of between 23 million and 24 million for all of 2015, down from an earlier forecast of 24.5 million to 26.5 million.
Ford was a relative latecomer to China and has been rapidly adding new products and plants. At the beginning of the second quarter it opened a new, $760 million assembly plant in Hangzhou, about 100 miles southwest of Shanghai. The facility will bring to 1.2 million Ford’s rated annual capacity in China, and comes as Ford grows into position as the market’s fourth-largest manufacturer.
The downturn in sales could pose problems for Ford – as it has for key rivals Volkswagen AG and General Motors.
But sales in North America have been offsetting any Chinese problems – June’s numbers beating expectations and leaving Ford optimistic about the rest of the year. The maker held to its earlier forecast for 2015 of an operating profit of between $8.5 billion and $9.5 billion.
Safety is one of the factors that could influence the final number at home. The National Highway Traffic Safety Administration has vowed to crack down on the industry as a result of some embarrassing issues, including the GM ignition switch problem and the recall of more than 40 million vehicles equipped with Takata airbags.
Ford began the third quarter with several recalls, including one covering 400,000 vehicles whose faulty ignition switches could leave them running.
On the positive side, Ford showed some gains in quality, according to recent reports, and the F-150 was ranked best-in-class according to J.D. Power’s APEAL study released last week.
“It’s being recognized by third parties we’re making a lot of progress on quality,” said CEO Fields during an interview on Detroit radio station WJR Tuesday morning, adding that, “We’re at or exceeding our own internal metrics” on quality.
So are buyers loading up the F150 with a ton of options, or is that how dealers are ordering them, so you have no choice to get a more expensive truck if you want an F150?
The aluminum bodied F-150 is a novelty at the moment so many people want to try it and see if there is any benefit to it. The F-150 has always been a top selling model so unless Ford has shot themselves in the foot with a design or manufacturing issue, the aluminum F-150 should carry on where it left off with a primarily steel body.
IME dealers always load up high demand models and/or charge sticker price premiums. Any time I see a sticker price increase I take note to never, ever under any circumstances ever do business with that dealer.