Ford Delivers 2Q $1.1 Billion Net Income

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North America remains strong with F-Series sales as Blue Oval redesigns global business model to enhance competitiveness.

Ford Motor Company released its second quarter 2018 financial results on July 26. Company revenue, net income, and adjusted EBIT were all down year over year mainly due to factors related to a North American production disruption at a parts supplier in the quarter, as well as ongoing challenges in the China market.

“This quarter, we achieved solid results in North America, offset in part by unexpected challenges with our overseas operations and headwinds in the business environment,” said Jim Hackett, president and CEO. “Despite this, our fitness actions continue to take hold and we’re clearly committed to redesigning and restructuring the underperforming parts of our business.”

Ford continues to be focused on redesigning business models by reallocating capital to opportunities with higher returns, restructuring and leveraging strategic partnerships. New this quarter, the company announced that these activities could have potential EBIT charges of $11 billion, with cash-related effects of $7 billion, over the next three to five years.

“The team is making the hard decisions to raise the returns of underperforming assets where we can via fitness and alternative business models, and we will disposition the rest,” said Bob Shanks, executive vice president and CFO. “This type of profound redesign will take time, and we will communicate as decisions are made, such as exiting traditional sedan silhouettes in North America.”

The North America business remains strong, with F-Series sales topping 236,000 units in the second quarter and on a record-setting pace through the first six months of the year. While production in the quarter was impacted by a fire at Meridian Magnesium Products of America, the Ford team worked swiftly with its partners to deploy creative solutions to restart impacted operations in just eight days to help restore supply.

 

‘This quarter, we achieved solid results in North America, offset in part by unexpected challenges with our overseas operations & headwinds in the business environment.’

 

On July 24, the company announced the creation of Ford Autonomous Vehicles LLC which will include Ford’s self-driving systems integration, autonomous vehicle research and advanced engineering, AV transportation-as-a-service network development, user experience, business strategy and business development teams.

Ford F-150

Outside of North America, it was a particularly challenging quarter for Asia Pacific and Europe. And due to those regions Ford is now lowering the range for full year 2018 adjusted earnings per share guidance, now guiding to an adjusted EPS of $1.30 – $1.50.

In Asia Pacific, the company is focused on China and taking urgent action to address underperformance. This includes improving cost competitiveness with aggressive fitness actions, localizing more product in China, as well as recruiting more local talent to key management positions. New products will also soon be entering the market, with 60 percent of the line-up being refreshed or new by the end of 2019.

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