According to the news report by Reuters, Ford Motor Co. released its fourth quarter earnings report on Wednesday in which the company posted an operating profit that was lower than expected. The company stated that losses in all regions except North America had pulled down its results.
The second largest auto manufacturer in the United States, which had recently announced that it had teamed up with German car maker Volkswagen AG, is currently in the process of restructuring is operations across the world.
The company is cutting down on operations in Europe, reorganizing operations in South America and trying to turn things around in China. All of them are unprofitable regions for the company at this time.
At the company’s headquarters just outside Detroit, Ford’s Chief Financial Officer Bob Shanks told reporters that 2018 was not a year that they were happy with and Quarter 4 just continued that dissatisfaction. Shanks also said that they were prepared for possible disruptions such as worker strikes this year in the regions where restructuring was going on.
Added to non-performing regions, the company also took a hit of $3.3 billion due to higher tariffs, unfavorable forex, increased commodity prices and recalls of its vehicles because of faulty airbags made by the now defunct company Takata.
A week ago, Ford had already given a gloomy forecast for 2019, citing uncertainty about Brexit and increased tariffs. Shanks said that because Ford had a very strong presence in the UK, it was exposed to the impact of Brexit more than other companies. The company also said that it had the potential to see higher earnings as well as revenue but did not expand on that statement.
This announcement was the direct opposite of the announcement that the US’s number 1 auto maker and rival General Motors Co. had made at the same time, where it forecast earnings for 2019 that beat all market analyst estimates.
On January 10, the iconic auto maker announced that it would be laying off thousands of workers and closing down numerous plans across Europe as a part of its restructuring plan to turn that region back to profitability.
Ford’s earnings report revealed that it had been hit by a net loss of $116 million, which is $0.03 per share, in the fourth quarter of last year. The same time a year ago, the auto maker had posted a $2.5 billion net profit, which was about $0.63 per share. These losses were incurred due to one-time costs the company had had to bear.
After excluding one-time charges, the company earned $0.30 per share, which was in accordance with the forecast Ford’s executives had made last week, which was also below analyst expectations.
For its North America region, Ford posted a pre-tax profit of $2 billion. However, every other region posted losses, with Asia’s losses being the highest at $381 million. Asia’s losses were fueled by declining sales in China.
The good news is that Ford ended 2018 with cash reserves of $23.1 billion. The company also said that it was committed to continued operations in Europe as well as South America and that its losses in China would narrow in 2019.
MarketWatch, the company’s shares fell by 2.1% during intra-day trading on Wednesday, just before the earnings report’s scheduled release after close of trading. In the last 20 quarters, the company has beat EPS (earnings per share) market analyst estimates 12 times, however, it also experienced an average 3.2% one-day, post-earnings drop in its share price 12 times.
The company’s shares went up by 1% to trade at $8.41 in late trading on Wednesday.