Published: Thu, April 26, 2018
Markets | By Josh Butler

Ford targets higher margins faster, to drop unpopular cars

Ford targets higher margins faster, to drop unpopular cars

Ford states that within the next two years, 90% of its model range will be comprised of utility vehicles, trucks and commercial fleet vehicles. The company is considering exiting or selling money-losing operations in Europe and South America, its chief financial officer, Robert L. Shanks, told reporters.

Ford plans to cut $11 billion in operating costs and $5 billion in capital expenditures between 2019 and 2022.

This news comes as part of Ford's "fitness" plan, outlined by CEO Jim Hackett past year, in which he said the Blue Oval would cut its operating costs by $14 billion by 2022.

Ford has announced that, in the USA, it plans to cull its existing base of passenger cars down to just two vehicles - the Mustang, and the Focus Active.

In a rather troubling press release, Ford announced that it will retire the Fusion, the C-MAX, the Taurus and the Fiesta on the North-American market by the 2020 model year.

That means the company will no longer sell the Fusion midsize auto, Taurus large vehicle, Focus compact and Fiesta subcompact in the region as the market continues a dramatic shift toward trucks and SUVs.

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Ford stock rose almost 3 percent in after-hours trading Wednesday to $11.40. We will have to make choices around how we disposition those businesses going forward.

Ford made $1.74 billion from January through March, or 43 cents per share, compared with $1.59 billion, or 40 cents per share a year ago. For the quarter, the automaker posted adjusted diluted earnings per share (EPS) of $0.43 on revenues of $41.96 billion. The entire team is focused on improving the operational fitness of our business, as well as meeting and exceeding our accelerated 2020 target of 8 percent margin and ROIC in the high teens.

CFO Shanks said the company expected that commodity costs would represent a $1.5 billion "headwind" in 2018, $500 million of which came in the first quarter. Its global profit margin was 5.2 percent in the quarter, as higher commodity costs reduced earnings in North America.

Shanks suggested that Ford could reduce investment in certain geographic regions or exit them completely if it did not see adequate returns on the horizon.

"The threat of tariffs, particularly we believe on steel, had an impact on market prices", Shanks said during an interview on "After the Bell". Ford says it will have over a dozen hybrid and electric vehicle options available by 2022.

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