Ford reported first-quarter revenue of $42 billion and net income of $1.7 billion, or 43 cents a share, beating analysts estimates by 2 cents a share. The revenue result was a 7% increase while net income reflects a 9% increase over year-ago results.
However, the company’s pre-tax profits were $2.2 billion, a 14% drop compared with last year’s result, which was attributed to commodity price increases and unfavorable exchange rates.
The 9% increase in quarterly profit can be almost entirely attributed to a drop in the automaker’s effective tax rate to 9% from 28.6%, Ford officials said.
“We are committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term,” said Jim Hackett, president and CEO, in a statement.
(And then there was one: Mustang. Ford cutting cars by 2022. Click Here for the story.)
“Where we can raise the returns of underperforming parts of our business by making them more fit, we will. If appropriate returns are not on the horizon, we will shift that capital to where we can play and win.”
Ford announced in October it would trim $14 billion in operating costs by 2022, and it’s now looking to accelerate the pace of those cuts — and expand them. The accelerated 2020 targets are enabled by $11.5 billion of cost and efficiency opportunities that span the entire company and include engineering, marketing and sales, manufacturing, material cost and IT.
In addition, Ford expects to improve its capital efficiency. The company had previously expected to spend about $34 billion in capital from 2019 to 2022 and has now cut that by $5 billion, to $29 billion over the same period.
(Click Here for more about FCA earning a record 1 billion euros.)
“This quarter is in line with expectations and consistent with our outlook for the full year, but we know we can, and must, do better,” said Bob Shanks, executive vice president and CFO. “The entire team is focused on improving the operational fitness of our business, as well as meeting and exceeding our accelerated 2020 target of 8% margin and ROIC in the high teens.”
Broken down by region, it’s clear that the North American segment is still the driver of profits for the company. North America reported earnings before interest and taxes of $1.9 billion, a 7.8% margin. Ford made $119 million from its European business, and lost money in South America, Middle East and Africa and Asia Pacific. The company also lost $102 million on its mobility segment.
Some of the cost savings will be driven by the company’s plans to make a substantial shift in its product line-up. The company is cutting all of its cars, with the exception of the Ford Mustang, to better cater to current wants of vehicle buyers of trucks, crossovers and sport-utility vehicles.
(Earnings down, GM still beats Q1 forecast. Click Here for the story.)
The move also includes the introduction of five new utility vehicles during the next few years. The cars will be phased out by 2022.
Sounds like Ford is following FCA’s example: no more cars. Yet Toyota is committed to them. Any thoughts anyone?
See today’s news from Toyota, Allen.