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Recalls And High Costs Cause Ford’s Profits To Fall

RMAutoBuzz

Ford has reported a $900 million decrease of it net income, which was $1.6 billion, during their first quarter results, as profit margins lowered and revenue increase for the company.

Ford’s pre-tax earnings decreased from last year by $1.6 billion (42 percent), set at $2.2 billion. In 2016, the company hit the best quarter in 114 years within the auto business.

On some good news, Ford’s revenue increased by four percent, to just over $39 billion, due to strong sales. Still, profits were affected by recall charges, new services around mobility, and higher costs for parts around some of the company’s launches in 2016.

Auto News reported that the company’s profit margins also decreased to 5.4 percentage points, which relays to a 4.4 percentage-point fall. Their earnings per share decreased to 40 cents from last year at this time, and while this is hard news for Ford, it is a better estimate than what analysts thought it would be, at 35 cents.

Ford had a hit of $467 million when it comes to the first quarter and warranty; with recall charges of $295 million; one for door latches, the other for engines that had the potential to catch on fire. Mark Fields, the company’s CEO stated that recall charges have negatively affected the bottom line for Ford in recent years, with a $600 million charge in 2016’s third quarter results due to vehicles with issues of this nature.

Ford also expects a $9 billion pre-tax profit, a decrease from 2016’s 10.4 billion, as the automaker invests in up-and-coming opportunities like electric vehicles and self-driving cars.
In other first-quarter Ford news, the company estimated a profit of $1.5 billion around its Ford Credit sector this year, which is a decrease of $1.9 billion. Ford Credit had a pre-tax profit for the first quarter of $481 million, a decrease of $33 million from last year.

Here’s hoping the company can turn things around. It’s a hard time to be Ford right now. But they have been through bad times before and come out on top.

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