Ford Motor’s second-quarter net income plummets 86% on restructuring charges

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DETROIT — Ford Motor Co.’s second-quarter net income plummeted 86 percent to $148 million as the automaker took special charges related to its ongoing global restructuring and made costly updates to high-volume utility vehicles.

But excluding the one-time items, Ford’s earnings before interest and taxes fell just 2 percent from a year earlier, to $1.65 billion. North American earnings of $1.7 billion were down 3 percent from the same period a year ago. Ford’s margin in North America was 7.1 percent, down 0.3 percentage points from the second quarter of 2018 amid executives’ push to achieve a double-digit margin for the region.

Globally, revenue was $38.9 billion, unchanged from the same period a year ago. Ford’s overall profit margin fell 2.4 percentage points to 0.4 percent.

“The underlying performance trends are strong,” Tim Stone, who became Ford’s CFO on June 1, said. “The fundamental redesign efforts are progressing and showing benefits.”

Global restructuring actions in Europe and South America, including plant closures and job cuts, accounted for virtually all of the $1.2 billion in special charges during the quarter.

The automaker last month said it would cut 12,000 jobs in Europe by the end of 2020 and reduce its manufacturing footprint from 24 plants to 18.  

Ford shares fell 6.3 percent in after-hours trading Wednesday after the automaker said it expects adjusted earnings for the year to fall short of analyst estimates.

Ford also said it expects earnings before interest and taxes of $7 billion to $7.5 billion, which could represent growth of up to 7 percent. The automaker previously only said there would be improvement. It also reiterated a prediction that free cash flow would increase.

Overseas, mobility losses

The automaker’s earnings in Europe nearly tripled to $53 million. It made $30 million in Asia Pacific, down 66 percent from the same period a year ago. But other regions were in the red. It lost $45 million in the Middle East and Africa, $155 million in greater China, and $205 million in South America. 

Ford Credit posted earnings of $831 million, up 29 percent year-over-year.

“Midway through this key year of action, we are pleased with the progress we are making toward creating a more dynamic and profitable business,” CEO Jim Hackett said in a statement.

Ford’s mobility business sapped $264 million from earnings, 46 percent more than a year ago. It invested $181 million in cloud-based software company Pivotal and lost $79 million on autonomous vehicle development, including the cost of adding employees to Argo AI, its robocar development partner.
Explorer changeover

Ford’s wholesale sales in North America fell 7 percent, including a 72,000-unit decline for the Explorer, which has been redesigned for the 2020 model year. But revenue in the region grew 1 percent as a more profitable sales mix offset the lower volume. 

Stone called the redesigned Explorer, built at Ford’s Chicago Assembly Plant, the company’s “most complex” launch in the next 18 months as it updates a majority of its product portfolio.

The vehicle was Ford’s third-best selling U.S. nameplate last year, behind the Escape and F-series pickups. It’s moving to a new rear-wheel-drive platform and will include a hybrid powertrain option. 

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