Ford says 2017 performance will fall from 2016 levels as costs rise

[Biker16]

http://www.reuters.com/article/us-ford-investors-idUSKCN11K1D0

 

 

By Bernie Woodall and David Shepardson

Ford Motor Co's 2017 financial performance will decline from this year as it increases spending on "emerging opportunities" like self-driving cars and other costs rise, the No. 2 U.S.-based automaker said on Wednesday.

Ford, like most of its chief rivals, is seeking ways to profit as the industry moves toward self-driving vehicles and ride-sharing. The company is taking a cautious path on this course, its chief executive, Mark Fields, indicated in an interview with Reuters on Tuesday.

Ford stock fell nearly 2 percent in afternoon trading.

Also, Ford Chief Executive Officer Mark Fields said all of the company's small-car production will be leaving U.S. plants and heading to lower-cost Mexico over the next two to three years.

Last week, Ford lowered its 2016 pretax profit forecast to $10.2 billion from at least $10.8 billion because of a charge in the third quarter for an expanded vehicle recall.

Ford said it "plans to achieve cost efficiencies averaging $3 billion annually between 2016 and 2018 and is adding new processes like zero-base budgeting to further its business transformation."

This will "offset the vast majority of costs being added to strengthen Ford’s business," but will not be enough to offset higher regulatory and vehicle development costs for what it calls emerging opportunities, such as electric vehicles.

Ford disclosed its outlook ahead of presentations later in the day to Wall Street analysts at its headquarters in Dearborn, Michigan.

It will incur regulatory costs largely linked to tougher fuel economy and vehicle emissions standards as well as safety requirements worldwide, Ford Chief Financial Officer Bob Shanks told analysts.

Shanks also said one of the "substantial headwinds" for the 2017 outlook is higher commodity costs in North America, where Ford derived about 90 percent of its second-quarter profit.

Shanks said Ford will pay a supplemental dividend of 40 percent to 50 percent of 2016 net income, as it did in March this year, if it reaches some financial targets and if no recession is seen on the horizon.

Edited September 14, 2016 by Biker16

[jpd80]

While all eyes are on North America, maybe the unspoken upside to this is other loss making divisions

may be reducing or turning positive. If that happens, Ford may deliver better than expected.

 

I wouldn't put it past Ford to hold back on this just to look like they exceeded their own goals.

[theoldwizard]

I am still waiting to hear if there will be more "consolidation" (plant closings) in EU. Mulally promised more cuts would be coming if they were not profitable.

 

I drove by the Dearborn Research and Engineering Center on Sunday and I did not notice any heavy construction equipment, so I wonder if they have actually "started" on their modernization project.

[BORG]

They have started construction (mostly demolition) and some infrastructure work. The Ford HQ renovation is a VERY longterm project however and it's not terribly visible at the moment.

 

Although now is probably a good time to dump your Ford stock if you haven't already because they are telling you they are facing significant headwinds locally and economically. As they did last time, they are getting ahead of this earlier than the rest of the industry.

Edited September 15, 2016 by BORG

[Biker16]

While all eyes are on North America, maybe the unspoken upside to this is other loss making divisions

may be reducing or turning positive. If that happens, Ford may deliver better than expected.

 

I wouldn't put it past Ford to hold back on this just to look like they exceeded their own goals.

 

There are tremendous opportunity for cost savings if Ford can consolidate production globally, and invest in reducing PD costs.

[theoldwizard]

 

There are tremendous opportunity for cost savings if Ford can consolidate production globally, and invest in reducing PD costs.

Ford has been doing a LOT of production consolation in the past 10+ years. One interesting not fully utilized facility is the old Wayne Assembly Plant. They had moved some stamping equipment in there, but I am sure that only took up a small percentage of the space.

 

Oakville is still running 1 shift, although dealers are complaining about long lead times for Edge and Flex.

 

Ohio Assembly can't be very busy with just E350/450 chassis cab/cutaway and F650/750 production. Weren't they supposed to get additional product ?

 

Sales of the old Transit Connect (based on my un-scientific observations) seemed strong, but I can not say the same for the current model. Bringing Transit Connect to the IS would be a feather in Ford's cap and stop the complaints about bypassing the "chicken tax".

 

 

As for reducing Product Development costs ... They have hired a lot of white collar recently in the US and are back to leasing some additional buildings in the Dearborn area. I foresee further reduction in PD in both England and Germany. EU, in general, has not shown the capability of designing "world products" that meet US standards and customer expectation.

Edited September 16, 2016 by theoldwizard

[fuzzymoomoo]

Ford has been doing a LOT of production consolation in the past 10+ years. One interesting not fully utilized facility is the old Wayne Assembly Plant. They had moved some stamping equipment in there, but I am sure that only took up a small percentage of the space.

 

Oakville is still running 1 shift, although dealers are complaining about long lead times for Edge and Flex.

 

Ohio Assembly can't be very busy with just E350/450 chassis cab/cutaway and F650/750 production. Weren't they supposed to get additional product ?

 

Sales of the old Transit Connect (based on my un-scientific observations) seemed strong, but I can not say the same for the current model. Bringing Transit Connect to the IS would be a feather in Ford's cap and stop the complaints about bypassing the "chicken tax".

 

 

As for reducing Product Development costs ... They have hired a lot of white collar recently in the US and are back to leasing some additional buildings in the Dearborn area. I foresee further reduction in PD in both England and Germany. EU, in general, has not shown the capability of designing "world products" that meet US standards and customer expectation.

2 corrections:

 

The old Wayne Assembly building is being used for sequencing for MAP now, but it's still only a small part of the floor space

 

Oakville is running 2 shifts now, they have been for a few years.

[Pioneer]

New stamping equipment wad installed at Wayne ISA. They expanded the building to accommodate it.

[fordmantpw]

Ford has been doing a LOT of production consolation in the past 10+ years. One interesting not fully utilized facility is the old Wayne Assembly Plant. They had moved some stamping equipment in there, but I am sure that only took up a small percentage of the space.

 

Oakville is still running 1 shift, although dealers are complaining about long lead times for Edge and Flex.

 

Ohio Assembly can't be very busy with just E350/450 chassis cab/cutaway and F650/750 production. Weren't they supposed to get additional product ?

 

Sales of the old Transit Connect (based on my un-scientific observations) seemed strong, but I can not say the same for the current model. Bringing Transit Connect to the IS would be a feather in Ford's cap and stop the complaints about bypassing the "chicken tax".

 

 

As for reducing Product Development costs ... They have hired a lot of white collar recently in the US and are back to leasing some additional buildings in the Dearborn area. I foresee further reduction in PD in both England and Germany. EU, in general, has not shown the capability of designing "world products" that meet US standards and customer expectation.

 

OHAP is building the chassis cab models (F3-550) of the '17 Super Duty.