Ford Motor Company reported third quarter 2014 financial results last month, with the automaker posting net income of $835 million, or 21 cents per share, on revenue of $34.9 billion. Even though the results represent the automaker’s 21st consecutive profitable quarter, they’re down on a year-over-year basis.
Compared to the third quarter of 2013, FoMoCo’s net income dropped $437 million, or 10 cents per share, while revenue dropped $900 million. In effect, most of the automaker’s financial metrics declined on some level. Partly responsible for the drop is the South American division, which is working through challenging economic climates.
Here’s how Ford South America fared in Q314.
Operating In A Challenging Environment
Ford South America is continuing to expand its product lineup, having replaced legacy products (such as the Ford Fiesta Classic) with global offerings as part of the One Ford strategy.
However, the division is working to manage the effects of several macroeconomic factors in some of the region’s countries, including:
- Slowing GDP growth
- Declining industry volumes in its larger markets
- Weaker currencies
- High inflation
- Policy uncertainty
Sales Volume, Market Share, Revenue
Wholesale volume was 113,000 units and revenue was $2.3 billion, down 21 percent and 17 percent, respectively.
Ford explains that the volume decrease is “primarily explained by a 700,000-unit decline from last year’s seasonally adjusted annual rate (SAAR) of 5.7 million units.”
This reflects the impact of the weakening economy in Brazil, import restrictions in Argentina, and lower production in Venezuela resulting from the limited availability of U.S. dollars. Another factor contributing to the drop is a non-repeat of last year’s stock build-up.
The decline in revenue is attributed to the following two factors:
- Lower wholesale volume
- Weaker currencies, which were partially offset by higher pricing
The lower wholesale volume resulted in a 0.4 percent slide in market share on an annual basis to 8.8 percent. Ford attributes this to the phase-out of the Fiesta Classic.
Ford South America posted a pre-tax loss of $170 million, down $330 million. It was negatively impacted by “lower volume and adverse balance sheet exchange effects”, according to Ford.
For the full year, Ford continues to expect South America to incur a loss of about $1 billion.