Ford net income plunges 50 per cent after product recall and Brexit ripples hits results
Ford announced a drop of more than 50 per cent in its third-quarter profits today after the auto trader took a hit from a safety recall earlier in the year.
The second-largest US car marker said lower sales, the high cost of the recall and complications surrounding the launch of a new truck had dented its income.
The results
Net income dropped 56 per cent to $961m, from $2.2bn a year before. Their earnings were 26 cents per share, above expectations of 20 cents from Reuters.
Third quarter revenue was $35.9 billion, down 6 percent, and North American operations revenue was $21.8 billion, down 8 percent.
Most of the big numbers were released by Ford last month, and little has changed since then.
The company's shares were down around two per cent at the news when the markets opened in New York after a 16 per cent fall this year.
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While Ford remains profitable, it has already announced it will be cutting production in the next quarter.
Why it's interesting
The auto maker said it was continuing to struggle in North American markets, and that the costs of ramping up its new super duty pick up truck had set it back.
It also had to fork out $600m on a recall due to a problem with a door latch and saw lower profits from the company's F-150 pick up truck.
The US-based company said it expected the impact of the Brexit vote to worsen next year. It estimated that the falling value of the pound will cost it $140m in the second half of the year, and $600m next year. But European sales are holding, for now.
“What’s happening to the company is essentially what’s happening in North America,” Bob Shanks, the chief financial officer, told journalists, pointing to issues with demand in the market.
But interestingly, it's rival General Motors have shown positive results in their reports out this week – put down to strong WUV sales in the US.
Fiat Chrysler also pushed up its full year results after positive third quarter operating profits earlier this week.
What the company said
Mark Fields, president & chief executive, said:
This quarter, we delivered key elements of our growth plan by fortifying our core business with the launch of the all-new Super Duty pickup, transforming Lincoln with the new Continental and investing in emerging opportunities with the acquisition of the Chariot crowd-sourced shuttle service. Importantly, we remain on track to deliver one of our best profit years ever.
Chief finance officer Bob Shanks added:
We continue to have a strong balance sheet, with cash and liquidity levels above our targets. We also were pleased to provide shareholders with distributions of $600 million during the quarter, bringing our year-to-date distributions to $2.9 billion.