Ford Ramps Up Cost-cutting, Ends Models
Ford Motor Co. (NYSE: F) has outlined a plan to cut costs and drop traditional sedan models in North America in a bid to boost profit margins at a faster pace than previously announced. The company now says that it will not invest in next-generation models of its traditional sedans for North America. CEO Jim Hackett said that the company will release further details in the coming months.
The company is working to realign its portfolio with a dramatic shift in consumer tastes, which has resulted in declining demand for its passenger cars. The company says that by 2020, its North American portfolio will mostly be made up of trucks and SUVs. The only two cars Ford will make will be the Mustang and a new Focus Active crossover, scheduled for release in 2019.
Ford is the No. 2 U.S. automaker behind General Motors. The automaker has been under pressure from investors to improve its product lineup and lift its profit margins. Ford’s adjusted pretax profit margin for the first quarter fell to 5.2 percent from 6.4 percent in the same quarter in 2017. The company is aiming to hit a pretax profit margin target of 8 percent by 2020.
Ford’s first-quarter earnings topped analyst expectations. First-quarter net income was $1.74 billion, or 43 cents per share. That is slightly higher than the $1.59 billion, or 40 cents a share Ford earned in first quarter of last year. The figure also beat analyst expectations of 41 cents per share, according to Thomson Reuters.
Europe was the only region outside of the U.S. to turn a profit for Ford. Slumping sales in China resulted in a loss in its Asia Pacific region. Hackett said the Asia Pacific region will probably continue to lose money in the second quarter before returning to profit in the last half of the year.
Ford reported $41.96 billion in revenue for the quarter, higher than the $37.16 billion analysts were expecting and up 7 percent from a year ago. Rising commodity costs and unfavorable foreign exchange rates hurt results in the latest quarter, but sales of high-margin pickup trucks and SUVs helped boost the company’s performance. The company’s stock rose as much 3.2 percent in after-hours trading.