Ford Misses Analysts’ Profit Estimates, Pension and Lay-off Costs Erode Earnings

Ford reported its fourth-quarter earnings Wednesday, showing its reorganization plans as pension and lay-off costs eroded the automaker’s profit and caused it to miss earnings estimates – despite stronger-than-expected sales in North America.

The fourth-quarter earnings also showed that Ford continues to struggle overseas; while its revenue grew by $1.7 billion in North America, it plunged in every other regions across the globe, according to CNBC.

Further, Ford lost its market share in every leading market in the South American region except Peru, while unfavorable exchange rates and a drop in sales affected the company’ bottom line in Asia and Europe.

Ford executives said that the Detroit automaker faced pressure on several other fronts during the fourth-quarter and last year. In 2018, tariffs cost the company nearly $750 billion and higher commodities prices cut around $1 billion from its bottom line, CNBC reported, citing Ford’s chief financial officer Bob Shanks on a conference call with analysts.

CEO Jim Hackett said “certainly, it has been a challenging year”. He also added that the company has now taken action to address the poor performance in some parts of the business.

According to Refinitiv data, Ford reported adjusted earnings per share of 30 cents, while Wall Street forecast 32 cents per share. On the other hand, revenue of the automotive segment exceeded the estimates of $36.88 billion to $38.7 billion. The company took a charge of $1.18 billion for “special items” – excluded from its adjusted earnings – emerging mostly from cost of pensions and layoffs.

On an unadjusted basis, the automaker lost 3 cents a share to $116 million during its last quarter, while it generated a profit of 63 cents per share to $2.52 billion in 2017.

During the last quarter, Ford’s total revenue was valued at $41.8 billion, slightly higher than its revenue of $41.3 billion during the same quarter a year earlier.

As 2018 was a challenging year, Ford now plans to build more resilient and competitive business model that can thrive irrespective of the economic environment, Shanks said.

The company further expects to be capable of funding its business as well as capital needs this year, and keep cash and liquidity at or beyond target levels, he added.

Ford closed at $8.34 a share Wednesday which has been tumbling by nearly 22 percent over the last 12 months, CNBC reported.

Author: Rahul Pandita

An experienced writer and editor, Rahul Pandita has written extensively about the impact of policy changes on business and finance. He is a regular contributor to many authoritative sites. When he is not writing, you can find him playing a game of chess.