Ford Forecast Trails Estimates on SUVs, China; Shares Fall
Ford is losing money and market share in China, where the car market is contracting for the first time in a generation.
(Bloomberg) -- Ford Motor Co. issued an annual profit forecast that disappointed investors as the automaker rolls out new sport utility vehicles and struggles to compete in China’s slumping car market.
Adjusted earnings will range from $1.20 to $1.35 a share, Ford said Wednesday, below analysts’ average estimate for $1.39. The second-largest U.S. automaker also missed projections for second-quarter profit, and its shares slumped in after-hours trading.
Chief Executive Officer Jim Hackett is leading an $11 billion overhaul aimed at reversing Ford’s fortunes by cutting thousands of jobs, reviving an aging line of SUVs and pickups and ditching slow-selling sedans. The company is losing money and market share in China, where the car market is contracting for the first time in a generation.
“The guidance was a disappointment, as Ford had previously signaled opportunity to improve in its most important regions -- North America, Europe, and China,” Dan Levy, an analyst for Credit Suisse, wrote in a note to investors. The second-quarter results are “a reminder that the path to improvement may be bumpy.”
Ford shares dropped 5.7% to $9.74 in after-hours trading after earlier falling as low as $9.46. The shares haven’t closed below $10 since June 26.
New versions of Ford’s Explorer and Escape SUVs debut this year, and it’s bringing back the Bronco off-roader in 2020. The company also just struck a deal with Volkswagen AG to jointly develop electric and self-driving cars.
A drop-off in shipments of the Explorer -- which is just ramping up production -- contributed to lower earnings and shrinking margin last quarter in North America, where Ford generates the bulk of its profit.
Ford lost $155 million before interest and taxes in China, with deliveries to dealers plunging 32% in the second quarter, as the company struggles with an aging product line. The carmaker has said it’s reducing inventory and trying to boost sales by introducing new or revamped models.
“We are seeing discreet signs of stability in our business in China even as the economy and the vehicle market are under recent and persistent stress,” Hackett said on a call with analysts. “We’re actively working on the design and launch of new products that will help us grow.”
Software Write-Off
The automaker also suffered a $181 million loss in its investment in a firm called Pivotal Software Inc., which caused the company to fall short of analysts’ estimates, Chief Financial Officer Tim Stone said.
Ford’s write-off of its entire stake in Pivotal, which the automaker acquired three years ago, is the latest misfire by Ford, which lost $65 million it invested in another “smart mobility” venture known as Chariot. Earlier this year, Hackett dismissed that as a learning opportunity. “This is a pivot for us, a bunch of things have been birthed from the Chariot experience,” he told reporters at the Detroit auto show in January.
To contact the reporters on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net;Kyle Lahucik in Southfield at klahucik3@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Kevin Miller, Chester Dawson
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