Motor Co. is sharpening its knives to cleave another $11.5 billion from spending plans and cut several sedans, including the Fusion
and Taurus, from its lineup to more quickly reach an elusive profit target.
expects to save $25.5 billion by 2022, Chief Financial Officer Bob Shanks told reporters Wednesday as Ford
reported first-quarter earnings per share and revenue that beat estimates. The company now anticipates reaching an 8 percent profit margin by 2020, two years ahead of schedule.
The cuts are aimed at kick-starting a turnaround effort almost one year after Ford’s board ousted its chief executive officer. New CEO Jim Hackett
has been trying to convince investors that betting on a rebound is a worthwhile wager by laying out plans to get rid of slow-selling, low-margin car models and refocusing the company around more lucrative sport utility vehicles and trucks.
“We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett said on an earnings call Wednesday. “We aren’t just exploring partnerships; we’ve now done them. We aren’t just talking about ideas; we’ve made decisions.”
First quarter adjusted earnings rose to 43 cents a share, topping analysts’ average estimate of 41 cents. Ford’s automotive revenue increased to $39 billion, exceeding the average projection for $37.2 billion in a Bloomberg survey.
Ford’s profit margin should “bottom out” this year, Hackett said on the call. The Asia Pacific region will probably lose money in the second quarter before returning to profit in the back half of the year. The company also is reviewing its strategic plans for South America.
“Everything will be on the table” to fix Ford, Shanks told reporters at its headquarters in Dearborn, Michigan. “We can make different investments, we can partner, we can exit products, markets — and we will do that.”
One factor that had been contributing to investor pessimism has been commodity costs, which Ford
expects will be a $1.5 billion headwind this year. About $500 million of that came in the first quarter, Shanks said. The automaker
began the year flagging to investors that pricier raw materials including steel and aluminum would contribute to profit declining in 2018.
Killing off cars
said it won’t invest in new generations of sedans for the North American market, eventually reducing its car lineup to the Mustang and an all-new Focus Active crossover coming next year. By 2020, almost 90 per cent of its portfolio in the region will be pickups, SUVs
and commercial vehicles.
That means the end of the road for slow-selling sedans such as the Taurus, Fusion
in the US. The automaker
conspicuously left the Lincoln Continental and MKZ sedans off its hit list, but since those models share mechanical foundations with Ford
siblings, their futures also are in doubt.
“For Ford, doubling down on trucks and SUVs
could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford
is willingly alienating its car owners and conceding market share.”