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Ford's 1Q net income falls on strong US dollar, lower sales in most regions

DEARBORN, Mich. – Ford’s net income fell in the first quarter, hurt by lower sales of key vehicles like the F-150 pickup and a stronger U.S. dollar.

But the Dearborn automaker says the picture should improve as the year progresses, and it’s still aiming for a full-year pretax profit of $8.5 to $9.5 billion, up from $6.3 billion in 2014.

“We feel we are very much on track to that breakthrough year we talked about,” Chief Financial Officer Bob Shanks said Tuesday.

Ford’s net income fell 6.6 per cent to $924 million in the January-March period. First-quarter earnings of 23 cents per share compared with earnings of 25 cents per share in the same quarter a year ago.

The results fell short of Wall Street’s expectations. Analysts surveyed by FactSet forecast earnings of 26 cents per share.

One reason for the miss: Analysts forecast a tax rate of 29 per cent for the quarter, but Ford’s actual rate was 34 per cent. That difference was worth about 2 cents per share, the company said.

Revenue fell by 5 per cent, or $2 billion, to $33.9 billion. That also fell short of forecasts of $34.3 billion.

Ford shares dropped 5 cents to $15.86 in midday trading.

Shanks said 70 per cent of the drop in revenue — or around $1.4 billion — was related to the strong U.S. currency. The dollar has climbed 8 per cent so far this year against the euro and other major currencies. Last week, General Motors Co. said that currency exchange cost it $1.8 billion in first-quarter revenue.

Ford’s global sales fell 1 per cent to 1.6 million. Sales rose in Asia and Europe but fell in North America, South America and the Middle East and Africa.

Ford said the continuing launch of its new F-150 pickup, which went on sale late last year, hurt North American sales because dealers don’t yet have a full inventory. Two plants make the F-150, in Michigan and Missouri, but only the Michigan plant was fully operational in the first quarter after a longer than usual changeover to make the truck’s body out of aluminum instead of steel. Ford’s Kansas City plant started making the new truck on March 13.

Shanks said F-150 sales were down 40 per cent for the quarter, or about 60,000 vehicles, and dealers aren’t expected to have normal levels of trucks on their lots until this summer. Sales of the Ford Edge SUV were also down significantly — about 15,000 vehicles — as the company changed over to an updated model.

North American pretax profit fell 11 per cent to $1.3 billion. Shanks said normal inventories of the F-150 and Edge, which are two of the company’s most profitable vehicles, could have improved pretax profits by $1 billion and raised the region’s operating margin from 6.5 per cent for to more than 10 per cent for the quarter.

Ford raised its guidance for full-year North American margins to 8.5 per cent to 9.5 per cent, up from 8 per cent to 9 per cent.

The company is struggling to sell small cars in the U.S., China and elsewhere; last week, it cut a shift at the Michigan plant that makes the Focus because of weak sales. But the upshot is that consumers are gravitating to SUVs, and Ford has several new or updated utilities going on sale this year, including the Ford Explorer and the Lincoln MKX.

While sales rose in Europe, particularly for commercial vehicles like the Transit van, revenue fell because of the stronger dollar. Ford lost $185 million in Europe in the first quarter, a $9 million improvement from a year ago.

In Asia, pretax profit fell by more than half to $103 million, partly because of the cost of launching the Lincoln brand in China. Ford plans to open 20 Lincoln dealerships in China this year.

Ford cut its losses to $189 million in South America, from $510 million a year ago, partly because of a big charge last year related to Venezuelan currency devaluation.