Ford earnings jump in 2017, but pain ahead this year

DEARBORN, Mich. — Ford Motor Co.’s full-year earnings jumped 65 per cent to $7.6 billion in 2017 due to tax and pension changes, but it’s already warning that this year will be tougher.

The adjusted earnings, of $1.78 per share, fell just short of Wall Street’s predictions. Analysts polled by FactSet predicted earnings of $1.79 per share.

Ford warned last week that its earnings will likely fall this year as U.S. sales soften. Ford is also impacted by rising costs for steel and aluminum, which accounted for a $1.2 billion hit to its 2017 earnings. Ford spends around $10 billion on commodities each year, with steel and aluminum accounting for two-thirds of that total.

The automaker expects to earn between $1.45 and $1.70 per share this year.

Ford Chief Financial Officer Bob Shanks said the company might be able to absorb those hits if it was leaner and fitter. Ford ended the year with a 5 per cent automotive operating margin, he said, far off its goal of achieving an 8 per cent margin.

Shanks said the company is putting initiatives in place that are designed to pare billions in costs. It wants to cut vehicle engineering costs, for example, and simplify manufacturing by offering customers fewer ways to order popular vehicles like the Ford Escape SUV.

The lion’s share of Ford’s profits came from North America last year, which posted a pretax profit of $7.5 billion. Ford eked out small profits in Europe and Asia but lost money in South America and the Middle East and Africa. Ford Credit, its finance arm, reported a $2.2 billion profit for the year.

Ford’s automotive revenue rose slightly to $145.7 billion even though its global sales were flat at 6.6 million cars and trucks. That was higher than the $144 billion analysts had forecast. Ford earned more on each vehicle thanks to a higher mix of expensive SUVs and pickup trucks.

Ford’s fourth quarter earnings jumped to $2.4 billion — from an $800 million loss a year ago — largely due to a recalculation of its pension costs and its future taxes. Its adjusted profit, of 39 cents per share, fell short of analysts’ forecast of 44 cents.

Fourth quarter automotive revenue rose 7 per cent to $38.5 billion, handily beating analysts’ prediction of $36.3 billion.

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