Ford's Profit Dips 35% on Increased Costs

Ashley Carr
April 30, 2017

Revenue was up 4%, at $39.1 billion, while earnings per share totaled 39 cents, topping Wall Street estimates of 36 cents.

Ford says it remains on track to earn a full-year pretax profit of $9 billion.

In North America, Ford's largest and most profitable region, revenues were flat, market share fell slightly as the company dialed back fleet sales, and operating profit margins plunged to 8.3% from 12.9% a year ago. The company recalled more than 230,000 vehicles because of the risk of engine fires and 210,000 vehicles for defective door latches. The company said it expects to spend $295 million to fix those problems.

Ford Motor Co.'s first-quarter profit fell 35% from a year earlier amid higher costs and weaker USA sales, sending the stock down 1.7% in early afternoon trading. Those higher costs were due to a $US467 million increase in warranty costs, a $US176 million increase in commodity costs, and a $US253 million increase in product launch costs.

Ford delivered 1.7-million vehicles globally in the first quarter, while Daimler delivered 754,300, of which 568,100 were Mercedes-Benz cars. Ford singled out its Lincoln division, F-150 and Super Duty as contributing to higher transaction prices in the US market and helping to deliver a still-healthy profit. While transaction prices were up $1,971 per vehicle on strong demand for Ford's heavy-duty trucks, USA sales fell 4% in the first quarter and market share shrank.

Ford plans to cut $3 billion in costs this year and expects profit to rebound in 2018, driven by continued strength in the USA pickup-truck market, the rollout of two new full-size SUVs and improving results at Ford Credit.

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David Kudla, CEO and chief investment strategist with Mainstay Capital Management, said plateauing sales will begin to fall in 2017, which would hurt companies' bottom lines, but regulatory changes from the Trump administration and strong truck and SUV sales could help companies remain healthy.

Transaction prices for its new cars and trucks rose $1,971 year-over-year, according to Ford, compared with an industry average increase of $506. Its automotive revenue was $35.2 billion, beating analysts' forecast of $34.2 billion.

For the first quarter, attributable net income declined to $1.587 billion or $0.40 per share from last year's $2.452 billion or $0.61 per share.

Net income fell 35 percent from the same quarter a year ago.

Shares of Ford rose by as much as 1.9% to $11.82 in premarket trades this morning.

Comcast and Ford released their latest earnings reports before opening bell this morning.

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