Ford sees lower 2017 profits, takes hit from pensions, Mexico

DETROIT: Ford Motor Co reported a fourth-quarter loss, citing an accounting change to pensions and costs for abandoning a factory in Mexico, which President Donald Trump had attacked on the road to the White House.
Ford also reaffirmed its forecast that 2017 profits would be lower, which contrasted with more upbeat forecasts from Detroit rivals General Motors Co and the US operations of Fiat Chrysler Automobiles NV.
Ford shares were down 3.2 per cent at $12.38.
Ford’s fourth-quarter results took a $200-million hit from costs related to cancelling a $1.6-billion small car plant in Mexico that had become a target for Trump during his campaign last year.
Ford said overall it will save $500 million by consolidating small car production planned for the new assembly factory at an existing plant in Mexico.
When it said it was cancelling the Mexican plant earlier this month, Ford said it would add 700 jobs in Michigan tied to production of electric and autonomous vehicles.
The suburban Detroit factory that builds the current Ford Focus small car will be converted to assemble pick-up trucks and a new Bronco sport utility.
The company said the decision was driven by slack demand and weak pricing for small cars, but Ford executives said they were encouraged by Trump’s promises of corporate tax cuts and regulatory relief.
Chief Financial Officer Bob Shanks said on Thursday Ford would await specific policies of the Trump administration for an idea of how they will affect the company’s future investment plans.
“We are watching,” Shanks said.
Ford has enough plants in the United States now and is not planning on building a new one, Ford Chief Executive Mark Fields told Wall Street analysts on Thursday. He added that the company has expanded some plants including the one that will add 700 jobs near Detroit. Ford’s results and its downbeat outlook point to other challenges for the Dearborn, Michigan automaker beyond plant investments.
Ford’s North American auto operations, which account for about 90 per cent of pre-tax profit, had adjusted profit margins for the quarter of 8.5 per cent, up from 8.2 per cent a year earlier.
GM, however, reported 11.2 per cent adjusted profit margin in North America in the third quarter, and has said it will easily eclipse its more than 10 per cent margin target for the region for 2016. GM reports earnings on February 7.
Ford’s 2016 North American pretax profit margin was 9.7 per cent, from 10.2 per cent in 2015. Ford CFO Shanks said the North American margin would have been 10.3 per cent last year if not for a $570 million recall expense. In Europe, Ford reported a record pretax profit of $1.2 billion for the year, while GM is in the red in Europe.
For the fourth quarter, Ford reported a loss of $783 million, or 20 cents a share, for the fourth quarter of 2016 because of a $3 billion non-cash accounting remeasurement announced last week, which is related to low interest rates. — Reuters