Ford Nets $1.3 Billion After Russia Write-off; Solid Results In A Challenging Year – Forbes
The automaker’s net income was $1.3 billion after accounting for taxes and $481 million in special charges for severance payments in Europe and the write-down to zero of its equity investment in its 50-50 Ford Sollers joint venture in Russia. The action reflects Ford’s present outlook for the Russian business, including a weaker ruble, lower industry volume and industry segmentation changes that negatively impact sales of Focus. Chief Financial Officer Bob Shanks noted that Russia remains an important market for Ford, despite the current economic and political challenges.
Overall, it was a strong quarter for Ford, which had sought to keep expectations low as it prepares for several important vehicle launches, none more critical than the redesign of its F-150 pickup trucks later this year. Ford will shut down its truck factories for a total of 13 weeks as it retools in preparation for the new truck. The company reaffirmed its full-year pre-tax profit guidance of $7 billion to $8 billion. “It continues to be a building block year for us,” said Shanks.
Ford lost market share in all regions, except Asia, leading to a one percent drop in wholesale volumes, and a two percent drop in revenues. Still, its automotive operating margin increased 0.2 percentage points to 6.6 percent. “Our second quarter results demonstrate the underlying strength of our business,” said Shanks. “We are delivering strong results in a year of aggressive global product launches and difficult external conditions in many parts of the world – a tribute to the power of our One Ford plan and the Ford team around the world.”
Pre-tax profits in all business units improved, except South America. Europe earned its first quarterly profit since the market collapsed three years ago, and Asia achieved a second-quarter record.
Results in North America were impressive, despite a 1.2-point loss in market share, driven by strong industry sales, a strong Ford lineup and a lean cost structure, even as it invests for future growth. Ford’s pre-tax profit was a record $2.4 billion in North America, for an 11.6 percent operating margin, up one percentage point from a year ago. Still, it’s a battle on Main Street, as Ford’s market share swooned to 15.3 percent from a year ago, reflecting a planned reduction in daily rental sales; lower F-150 sales ahead of the model changeover, and lower shares for two older products, the Ford Edge and Focus. For the full year, Ford continues to expect North America pre-tax profit to be lower than 2013 and operating margin to be in the 8 percent to 9 percent range.
“Our One Ford plan continues to deliver, enabling us to reach our 20th consecutive quarter of profitability,” said Ford’s new chief executive Mark Fields, who replaced the retired Alan Mulally. “Moving forward, our commitment is to build on this success by accelerating our pace of progress, while delivering product excellence and driving innovation in all areas of our business.”