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Ford posts first quarterly loss in 2 years

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DETROIT — Ford Motor Co. lost $116 million in the fourth quarter, its first loss in two years, and its profit for all of 2018 fell by more than half as lower margins in North America combined with losses everywhere else in the world.

The automaker said tariffs and higher commodity costs added up to a $1.8 billion hit during the year, and it took an $877 million hit to pensions and other benefit funds when financial markets tumbled late in the year.

“It’s not a year that we were happy with,” Ford CFO Bob Shanks said.

But he argued that the company “made a lot of progress underneath the surface in North America” and has begun working to fix problems in Asia and Europe.

Most of Ford’s financial metrics for the quarter were negative, save for revenue that rose 1.2 percent to $41.8 billion behind improved product mix and higher net prices.

On the year, revenue rose 2.2 percent to $160.3 billion but net income fell 52 percent to $3.7 billion.

Ford earned $7.6 billion in North America in 2018, 6 percent less than the prior year. That will result in an average profit-sharing payout to most UAW members in March of $7,600, which is $100 more than last year because of accounting adjustments made to last year’s results.

The company lost $2.2 billion in the rest of the world, with the Asia Pacific region accounting for half of the red ink. Ford lost $678 million in South America and $388 million in Europe.

Ford Credit had its best result in eight years, with a profit of $2.6 billion, a 14 percent increase.

Ford shares gained nearly 1 percent in after-hours trading, as of 4:42 p.m. ET. 

Mobility expenses

Shanks said spending on mobility services throughout the year amounted to a loss of $674 million, split evenly between development work on autonomous vehicles and on investments such as Ford’s purchase of an electric scooter company called Spin.

In addition to tariffs and higher commodity costs, Ford said it took charges totaling nearly $800 million tied to recalls of vehicles with defective Takata airbags and lost about $800 million related to foreign currency exchange. Combined, that’s about $3.4 billion lost to factors that were entirely outside Ford’s control, Shanks said.

“If you put those aside, North America actually advanced in the year,” he told reporters at Ford’s headquarters. “That’s extremely encouraging, because it is the foundation of the business.”

Shanks said Ford expects results to improve in 2019, though he again declined to provide more specific guidance than the vague projections that frustrated analysts and contributed to a decline in the company’s stock last week. In the U.S., it has several high-profile vehicles coming to market, including the Explorer and Escape crossovers, after a recent product lull during which its U.S. market share declined.

“We’re going to have a lot of ammunition in terms of new product,” Shanks said.

Potential labor disruption

He cited the potential for labor disruptions in the year ahead as one potential negative. Ford has to negotiate with workers in Europe as part of its restructuring in that region, he said, and the UAW’s contracts with all of the Detroit 3 automakers expire this fall.

Ford knows what it needs to do to fix its business and is confident in its plan, Shanks said, though he declined to elaborate on any details that the company has not yet released.

“The choices that we’ve made in terms of what we are going to do to improve the business are largely made,” he said, “and now it’s just down to execution.”

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