Ford to severely reduce car portfolio in the U.S.

United States
Published:  26 April, 2018

The Michigan headquartered automotive manufacturer has released positive first quarter results, in line with expectations, and says it could exit underperforming segments as it continues to restructure its portfolio.

Ford’s revenue in the first quarter of 2018 stood at US$42 billion (+7%), driven by “higher volume from consolidated operations, favourable exchange-related effects, and higher net pricing”, said Robert Shanks Chief Financial Officer, Ford Motors, during the analyst earnings call on April 25. Net income was US$1.7 billion in the quarter, up +9% year-over-year and Company adjusted EBIT was US$2.2 billion, down US$335 million from a year ago, due to commodity cost increases and adverse exchange.

However, outside North America in the Automotive segment, results were a combined loss of US$203 million, with each region incurring a loss except Europe. The combined loss was US$248 million worse than a year ago, attributed to the Asia-Pacific region, which recorded a loss of US$119 million, mainly led by China. “While we earned China equity income of US$138 million, this was more than offset by engineering costs incurred by Ford for future products, including for newly localised entries, including Lincoln and next-generation Explorer, as well as a loss for Lincoln as we continue to establish and grow the brand and the network”, added Shanks.

Under pressure to accelerate cost and efficiency, Ford announced it will drop sedan models in North America, due to declining consumer demand and product profitability, to strengthen SUVs and trucks. The Company says that by 2020, almost 90% of its portfolio in the region will be comprised of trucks, utilities and commercial vehicles and that only two passenger models will continue; the best-selling Mustang and the all-new Focus Active crossover coming out next year. “We will focus on products and markets where we know we can win”, said Lynn Antipas Tyson, Executive Director of Investor Relations, Ford. The carmaker expects to improve its capital efficiency and says it had previously expected to spend about US$34 billion in capital from 2019-22 and has now cut that by US$5 billion, to US$29 billion over the same period.

Adding hybrid-electric powertrains to high-volume, profitable vehicles models, autonomous technology and mobility experience, are three areas Ford says it will also focus on. Battery electric vehicle rollout is to start in 2020 with a performance utility, and 16 battery electric vehicles are to be developed by 2022.