27 Oct 16
News

Ford Q3 profit down 56%

As it had forewarned, Ford Motor Company reported a "much weaker than normal" third quarter, its net income dropping 56% to $957 (€876.5) million. In the strong third quarter of last year, the company had a profit of $2.19 (€2) billion. For the past quarter, corporate revenue fell by 6% to $35.9 (€32.8) billion and pre-tax profit was down 55% to $1.41 (€1.29) billion.

Already in July, Ford CEO Mark Fields had predicted a less than stellar result for Q3 in June, pointing to softening demand in the U.S., rising incentives, and overseas challenges such as Brexit. Reacting to the Q3 results, Fields promised that Ford “remains on track to deliver one of its best profit years ever”, holding fast to the projected $10.2 (€9.33) billion full-year pre-tax profit. Ford's pre-tax profit for 2015 was $10.8 (€9.88) billion.

The bulk of Ford's earnings decline can be traced to North America, in particular to:

- A recall to fix a faulty door latch, which affects almost 2.4 million vehicles and is estimated to cost $640 (€585) million this year alone.  

- The costly redesign and launch of the heavy-duty F-series trucks.

- A drop in F-150 pickup (pictured) sales revenues, after having recently hit full production on the popular model.

As a result of those three factors, Ford's operating margins in North America dropped from 12.3% in Q3 2015 to 5.8% in the same period this year. Globally, Ford's automotive operating margins fell 4.4 points to 3.3%.

Better news came out of the Asia-Pacific region, where Ford managed a record-breaking Q3 pre-tax profit of $131 (€119) million, up $109 (€99.6) million. Ford’s joint ventures in China added $320 (€292) million to the pre-tax profit, up from $67 (€61) million last year.

In Europe, Ford generated a pre-tax profit of $138 million, its best Q3 result since 2007. However, the company expects profits for the second half of the year to fall $140 million due to Brexit and the subsequent fall of the British pound.

In South America, Ford had a pre-tax loss of $295 million, even worse than the $163 million loss in Q3 2015. However, Ford thinks the Brazilian economy has hit bottom, and is about to rebound.

Authored by: Frank Jacobs