Ford Motor Co. posted third-quarter profit Thursday that fell by more than half, buffeted by a slowing U.S. market and higher spending for its premier pickup model.
Net income dropped to $957 million from $2.19 billion a year earlier, Ford said in a statement. The decline, while substantial, was less than analysts predicted as the automaker reduced some marketing costs. Profit excluding some items was 26 cents a share, compared with the 20-cent average projection of analysts surveyed by Bloomberg.
The profit plunge came as Ford continued to spend big on its aluminum-bodied Super Duty pickup and to transform itself into a mobility company that can take on Uber and Google. The company has said profit would fall this year and next, and investors pushed Ford shares down 16 percent this year. Ford shares fell 14 cents, or 1.2 percent, to close Thursday at $11.74.
"We're going to stay real focused on putting out a great product, running a responsible business and growing in emerging mobility areas," Chief Executive Officer Mark Fields said in an interview with Bloomberg Television.
The better-than-expected results in the third quarter may be fleeting because cost-cutting and market expense reductions won't be repeated in the year's final three months, Ford said. The company reiterated its guidance for pretax profit this year of about $10.2 billion, and said it spent $600 million to recall faulty door latches, $30 million less than projected.
Profit was hurt as the automaker trimmed production as growth slowed in the U.S. market. The company books revenue when it ships cars and trucks to dealers, not when they actually are sold to customers, and wholesale transactions fell to 687,000 -- down 84,000 from a year earlier. There also were glitches in the manufacturing rollout of the new Super Duty, a highly profitable model.
"We have had some supplier issues," Chief Financial Officer Bob Shanks told reporters at Ford's headquarters in Dearborn, Mich., without specifying the problems. "There's never a perfect launch. These are very complicated vehicles with thousands of parts coming together."
Ford expects the operating cash flow to turn positive again this quarter, he said.
The automaker may be going too big with its $4.5 billion investment in electric vehicles and overestimating how quickly the market will shift to self-driving vehicles, Morgan Stanley analyst Adam Jonas wrote in an Oct. 13 note. The company has said it will be selling 100,000 robot taxis a year by 2021.
"Ford wants to rebrand itself as a mobility company," Jonas wrote. "We think it will be a pure play auto company for many years to come."
Fields, in the television interview, said he's confident those plans will pay off.
"For the foreseeable future, we're going to be in investment mode" on mobility projects, Fields said. "Clearly the investments we're making in emerging opportunities, whether it's electrification or autonomy or mobility, will impact our earnings. Further out, those businesses will start to contribute to the company's bottom line."
Ford's fading fortunes contrast with General Motors, which reported record third-quarter net income of $2.8 billion Tuesday, and Fiat Chrysler Automobiles, which had a 29 percent increase in earnings in the quarter and raised its profit forecast for the year to at least $6.3 billion.
Even GM's strong quarter couldn't prevent its shares from declining, as investors push down auto stocks on concern that industrywide U.S. sales are about to plateau after a record six years of gains.
Ford's U.S. light-vehicle sales fell 6.7 percent in the quarter to 632,123 from 677,163 a year earlier, according to researcher Autodata. To reduce rising inventory, the automaker temporarily shut five plants this month.
Fields, in the interview, took heart from Ford's improved performance in several regions.
"In Europe we have very healthy improvement in our profitability," Fields said. "It was our sixth quarter of profitability in a row, and we've actually made over a billion dollars in Europe this year" and had record earnings in Asia.
Automotive revenue fell to $33.3 billion, a smaller decline than analysts' average estimate of $33.1 billion. North American pretax income was $1.3 billion, down from $2.9 billion a year earlier. Revenue for the region fell 8 percent.
Europe pretax profit of $138 million was the best third quarter since 2007. Ford's European sales rose 6.7 percent this year through September to 1.04 million vehicles, the biggest gain since 2009.
Britain's decision to leave the European Union will cost Ford $200 million this year and $600 million next year, Shanks said.
In the Asia-Pacific region, pretax profit was a record $131 million, up from $109 million a year earlier. Ford sales in China grew 11 percent this year through September to 791,309 vehicles.
Business on 10/28/2016