Ford Motor Co. (IW 500/4) said financial results will decline next year as it boosts spending on new businesses such as driverless and electric cars while fixing weaknesses in luxury autos and emerging markets.
The automaker didn’t provide specific financial targets in a statement ahead of investor-day presentations on Sept. 14. Still, Ford’s guidance contrasted with average analyst estimates in a Bloomberg survey for adjusted earnings per share to rise by 1 cent next year, to $1.84, and for adjusted net income to rise to $7.45 billion from $7.37 billion. The slide should be temporary, with results rising in 2018, Ford said.
The spending bump coincides with Ford’s planned 2021 introduction of its first self-driving car, a business it said may account for a fifth of sales by the end of next decade. It’s investing $4.5 billion to introduce 13 new electric vehicles, accounting for 40% of its lineup by 2020.
At the same time, it’s expanding the Lincoln luxury lineup, working to improve small-car profitability and investing in struggling emerging markets including Russia and South America.
Ford’s optimism about autonomous and electric cars has done little to appease investors amid signs that the U.S. auto market has peaked and the profit records appear to be over. There’s also concern about how the 113-year-old automaker will fare against new competition such as Alphabet Inc.’s Google self-driving car and other Silicon Valley technology companies moving into mobility.
Ford shares fell 1.5% to $12.20 at 10 a.m. Sept. 14 and are down about 13% for the year.
“Our capital allocation continues to be disciplined and to deliver strong returns, and we are fully prepared for a downturn,” said Chief Financial Officer Bob Shanks. "As a result, we plan to offer a secure regular dividend through the business cycle with an option for upside on investments to keep our core business strong and to win in emerging opportunities.”
The company said it is “re-evaluating” its strategy and business model in India.
Cost Reductions
The Dearborn, Mich.-based automaker said it’s working to lower expenses after last week cutting its 2016 pretax profit forecast last week to $10.2 billion from at least $10.8 billion because of the cost of an expanded recall of faulty door latches. The second-largest U.S. automaker said it plans to reduce costs annually by $3 billion between this year and 2018.
Ford said it expects to remain cash-flow positive through 2018 and to keep a cash balance at or above $20 billion. It’s targeting 8% margins for its traditional automotive business and margins of 20% or more for “emerging businesses.”
The automaker said that by 2030, it expects electrified model offerings to surpass conventional vehicles with internal combustion engines.
“As we expand to be an auto and a mobility company, we’re not moving from an ‘old’ business to a ‘new’ business. We’re moving to a bigger business,” Chief Executive Officer Mark Fields said.. “The world is moving from simply owning vehicles to owning and sharing them. That’s why we are expanding to sell more vehicles and provide transportation services at the same time.”
By Keith Naughton
