Ford Issues Cautious Outlook on Margins, North American Profit

By EarningsFOXBusiness

Ford Motor (NYSE:F) cautioned on Wednesday that its North American margins this year could be weaker than previously thought, while the automaker also projected lower 2014 profits in the region.

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Looking further ahead, the company warned that its plan to achieve operating margins of 8% to 9% by 2015 or 2016 is “at risk” due to softness in Europe and Venezuela.

Shares tumbled 6.3% to $15.65 on the news, pulling back from a gain of 29% this year.

Ford said its pretax profit and volumes in North America may be lower next year compared to 2013, as the No. 2 U.S. automaker embarks on an aggressive push to launch 16 new vehicles there.

The cost of launching those vehicles, including a redesigned F-150 pickup truck, was factored into the company’s expectations for a full-year operating margin of 8% to 9%. Its 2014 profit is projected to be between $7 billion and $8 billion.

“The payoff for North America from the 2014 launches and investments we incur for future periods will be a stronger product lineup and volume and revenue opportunities into 2015 and beyond,” chief financial officer Bob Shanks said in a statement.

The next fiscal year will likely include $400 million in European restructuring costs, Ford noted, in addition to higher launch and engineering costs stemming from its vehicle launches.

For the current year, Ford expects pretax earnings of $8.5 billion and margins of 9.5% to 10%, down from the car company’s prior guidance of 10%. The difference reflects warranty expenses of $250 million to $300 million related to a recent recall of the Escape 1.6-liter engine.

Ford’s 2013 profit in North America still remains on track to be the highest in more than a decade.

The Dearborn, Mich.-based company also said it has seen a quicker-than-expected decline in the company’s pension obligations. Ford lowered the amount of cash needed to fund pension plans by about 50% over the next several years, thanks to better discount rates and progress made on pension funding.