Ford Motor Company has released its financial earnings for the the third quarter of 2013. The automaker posted a net income of $835 million, down $437 million, on revenue of $34.9 billion, down $0.9 billion. In much the same fashion, all of the automaker’s results saw a drop on a year-over-year basis.
“During the third quarter, we continued to introduce an unprecedented number of new vehicles and invest heavily in the new products and technologies that will deliver strong profitable growth beginning next year,” said Mark Fields, president and CEO. “We also addressed business challenges head-on using our proven One Ford plan. Everyone at Ford remains focused on accelerating our pace of progress, while delivering product excellence and innovation in every part of our business.”
Sales Volume, Revenue, Market Share
Ford’s Q3 2014 wholesale volume was 1,493,000 units, down 52,000 units from the 1,545,000 wholesales seen in Q3 2013. Revenue was $34.9 billion, down $900 million from the $35.8 billion sin Q3 2013.
Market share was down in North America, South America, but up in Europe, and Asia Pacific.
Ford’s Q3 2014 was the firm’s 21st consecutive profitable quarter. However, the $1.2 billion pre-tax profit was $1.4 billion lower than a year ago.
This, according to Ford, is “more than explained by three factors — lower volume, higher warranty costs, and adverse balance sheet exchange effects.”
Net Income, Earnings Per Share
Net income for the quarter was $835 million, or 21 cents per share, a decrease of $437 million, or 10 cents, from a year ago.
Net income was affected by pre-tax special item charges of $160 million for separation-related actions, primarily to support Ford’s European transformation plan.
- North America profit of $1.4 billion but sales volume, revenue, operating margin, and profit were down. Full Ford North America Q314 earnings.
- South America loss of $170 million, with a drop in sales volume, revenue, and operating margin. Full Ford South America Q314 earnings.
- Europe loss of $439 million, but sales volume and revenue up, while operating margin down. Full Ford Europe Q314 earnings.
- Middle East and Africa loss of $15 million, but sales volume, revenue, and operating margin up. Full Ford Middle East and Africa Q314 earnings.
- Asia Pacific profit of $44 million, with sales volume and revenue up, but operating margin down. Full Ford Asia Pacific Q314 earnings.
- Ford Credit profit of $498 million, $71 million higher than a year ago. Full Ford Credit Q314 earnings.
In the third quarter, Ford declared a dividend of $0.125 per share on the company’s outstanding Class B and common stock and paid about $500 million in dividends. Ford also completed the previously-announced share repurchase program.
Ford’s third quarter operating effective tax rate was 31 percent. The company continues to expect its full-year operating effective tax rate to be about 35 percent.
While the figures presented above outlined the results for Ford as a whole, following are the results of its automotive operations:
Sales Volume, Revenue
Total Automotive third quarter wholesale volume was 1,493,000 units, down 3 percent from a year ago.
The lower volume is more than explained by an unfavorable change in dealer stocks related to product launch effects and supplier parts shortages, as well as declining industry volume in South America. Higher industry volumes in other regions was a partial offset.
Revenue was down 3 percent from a year ago to $32.8 billion.
Operating margin was 2.5 percent, a decrease of 4.5 percentage points from a year ago.
Automotive pre-tax profit of $686 million was $1.5 billion lower than a year ago. The drop in profit was mainly explained by higher warranty costs, including recalls, mainly in North America, and lower volumes in North and South America, as well as adverse balance sheet exchange effects, mainly in South America.
Ford’s Automotive operating-related cash flow was negative $700 million in the third quarter.
The negative results are more than explained by unfavorable changes in working capital, including the effects of the five weeks of downtime in the quarter at the Dearborn Truck Plant as the company transitions to the all-new 2015 F-150, as well as supplier parts shortages. The company expects fourth quarter working capital changes to be positive.
The company ended the third quarter with Automotive gross cash of $22.8 billion, exceeding debt by $7.9 billion, with Automotive liquidity of $33.6 billion.
“The continued implementation of our One Ford plan enabled us to reach our 21st consecutive quarter of profitability, and we are encouraged in particular by our record market share in China,” said Bob Shanks, executive vice president and chief financial officer. “Our focus remains on profitably growing the business, and our investments this year are laying the groundwork for our future success.”
Ford expects full-year outlook for pre-tax profit to be unchanged at about $6 billion, excluding special items.
It remains focused on delivering the key aspects of the One Ford plan, which are unchanged:
- Aggressively restructuring to operate profitably at the current demand and changing model mix
- Accelerating the development of new products that customers want and value
- Financing the plan and improving the balance sheet
- Working together effectively as one team, leveraging Ford’s global assets
In 2015, Ford expects to realize the benefits of its global product investment and growth strategies, and will continue its strong product push with 16 global vehicle launches. The company expects its pre-tax profit, excluding special items, to be significantly higher — in the $8.5 billion to $9.5 billion range — with all five Automotive regions improving on 2014 results.
“We are committed to offering our customers the freshest lineup of world-class vehicles in the industry,” said Fields. “Our One Ford plan remains fundamental to our performance going forward, and our investments this year will fuel profitable growth in 2015.”
Ford provides the following statement on risk factors associated with its business.
Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by Ford management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
- Decline in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geopolitical events, or other factors;
- Decline in Ford’s market share or failure to achieve growth;
- Lower-than-anticipated market acceptance of Ford’s new or existing products;
- Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning assumption, particularly in the United States;
- An increase in or continued volatility of fuel prices, or reduced availability of fuel;
- Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;
- Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
- Adverse effects resulting from economic, geopolitical, or other events;
- Economic distress of suppliers that may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase costs, affect liquidity, or cause production constraints or disruptions;
- Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or other financial distress, production constraints or difficulties, or other factors);
- Single-source supply of components or materials;
- Labor or other constraints on Ford’s ability to maintain competitive cost structure;
- Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition;
- Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates or investment returns);
- Restriction on use of tax attributes from tax law “ownership change;”
- The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty costs;
- Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or sales restrictions;
- Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;
- A change in requirements under long-term supply arrangements committing Ford to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller (“take-or-pay” contracts);
- Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments;
- Inherent limitations of internal controls impacting financial statements and safeguarding of assets;
- Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a third-party vendor or supplier;
- Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
- Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;
- Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
- Increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles; and
- New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions.
- Ford cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Ford’s forward-looking statements speak only as of the date of their initial issuance, and Ford does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in Ford’s Annual Report on Form 10-K for the year ended December 31, 2013, as updated by Ford’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.