DEARBORN (WWJ) – Rough weather and rising warranty costs pushed Ford’s first quarter profit down by 39 percent. The $989 million bottom line was lower than analysts were expecting.
Without one time charges, Ford’s earning would have come in at $1.4 billion, still off from the $1.6 billion they made in the first quarter of 2013.
“We had a solid quarter, and we are on track with our most aggressive product launch schedule in our history,” said CEO Alan Mulally.
Weather alone, cost Ford $100 million in North America, as it tried to deal with a number of events that interrupted production.
“So we had premium freight to try to expedite parts from suppliers to our factories,” said Chief Financial Officer Bob Shanks. “Then we had to incur overtime to try to make up for schedule misses.”
Ford earned $1.5 billion in North America, off from the $2.3 billion they made in 2013. The company says it expects its North America pre-tax profit to be lower than 2013. For workers, that will likely mean smaller profit sharing checks.
Warranty issues cost Ford about $500 million dollars, as the increased likelihood of recalls caused the company to put more money into a fund that is used to pay for repairs.
Shanks expects things to get better from here.
“We do think, for the balance of the year, the remaining quarters will be stronger for the company.”
Ford says it still expects to earn between $7 and $8 billion for the year, slightly off of last years pace.
“Overall, we expect 2014 to be a solid year for the Ford Motor Company,” said Mulally.
Strong sales in China resulted in a record quarter in Asia Pacific, where Ford made $291 million.
The situation in Europe appears to be getting a little better, as rising sales helped Ford cut its losses in half to $194 million.
“Our plan is to make a profit in 2015,” said Shanks. “We believe we are very much on track to that.”
Even though Ford’s earnings are less than Wall Street Expectations, the shanks the outlook remains encouraging.
“The underlying run rate of our business in the first quarter was strong,” said Ford Chief Financial Officer Bob Shanks. “We are particularly encouraged by Asia Pacific’s record profit, driven by very positive customer response to our new products, underscoring the traction and success of our growth plans in what is now the largest market in the world.”
One area that remains a mystery is the timing of CEO Alan Mulally’s departure. There were reports earlier this week that he would depart earlier than originally planned, and turn the reigns over to Chief Operating Officer Mark Fields.
“Clearly, we don’t comment on speculation,” said Mulally. “We have no change to the plan.”
That plan has Mulally staying through the end of the year. The Ford CEO, however, saying that the company is prepared for any leadership change.
“Bill (Ford) and I have put a very high priority, 7 years ago that we would further develop our team worldwide, and have a very robust leadership development and succession plan. We’re very very pleased with the progress on that today.”
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