Ford’s woes overseas get worse
Ford is doing pretty well at home. But it’s overseas struggles are getting worse.
The US automaker reported on Wednesday it made $7.6 billion in North America in 2018, a touch below what it made last year, although it did report a strong fourth quarter. Ford Credit, the company’s financial services arm, made $2.6 billion for the year.
But Ford lost money in every other region of the world. And in most regions, the results were worse than a year earlier. That led to a sharp drop in company-wide net income.
Europe, which posted a profit last year, swung to a $398 million loss for the year. The Asia Pacific region suffered a $1.1 billion loss after a profitable 2017. South America trimmed losses but still ended up with a $678 million hit for the year. Only Africa and the Middle East was near to break-even with a $7 million loss. All told losses outside of North America topped $2 billion for the year.
“I’m not happy with the way we performed” in China, Ford CEO Jim Hackett said on an analyst call Wednesday. But he said the entire industry was hit by a sharp downturn in Chinese auto sales in the second half of the year.
“The market moved on everybody,” he said.
The company was also hurt by rising expenses due to tariffs, primarily on steel and aluminum, and other commodity price increases. Together those costs are up $1.9 billion on an annual basis.
The results were not a surprise. Ford had warned about its company-wide full-year results. And shares were little changed in after-market trading. But the flood of red ink drove home the need for the company to move forward with hits plans to restructure its business, a shake-up that it said will cost $11 billion in the coming years.
Ford executives said the results in 2018 showed a company in transition. In North America it announced a decision to drop most traditional sedan models to concentrate on SUVs and trucks. And it committed to investing more in the next generation of vehicles such as electric and self-driving cars.
“For Ford, 2018 will be known as the year between the business that wasn’t designed right and the business that we know will win,” said Hackett. “Certainly it was a challenging year.”
He again promised investors that they would soon get details about how it plans to spend $11 billion to reshape its business, but added Ford hasn’t reached all the agreements it needs to with other parties to reveal those plans.
“In the coming months you can expect us to share more specific initiatives related to the redesign of our global business,” Hackett told analysts in a conference call. “There’s nothing more important than having you understand what is happening there. I want to confirm that the plans are in place and that we’re taking action.”
Although most of the details of that restructuring have yet to be released, Ford has announced plans to close plants and cut jobs in Europe. And it has said that a review of its operations in Russia is underway.
Ford did announce an alliance with Volkswagen earlier this month. The move will let the two build some trucks and vans together and could lead the to develop the next generation of electric and self-driving vehicles.
Ford officials said despite the large losses in Asia-Pacific, it is not looking at pulling out of China.
“We think it [the Chinese car market] could be twice the size of the US by 2025,” said Jim Farley, Ford’s president of global markets. “So getting our business back on track there is essential.”