Ford 1Q earnings down on recalls, lower sales; revenue rises

Ford cars are seen on sale at a dealership of Genser company in Moscow Russia

The No. 2 US automaker, which reiterated its pretax profit forecast for 2017, warned investors in late March that higher costs and lower sales volumes would hurt quarterly earnings.

Ford's first-quarter adjusted pretax profit fell 42% to $2.2 billion, dinged by a $295 million recall expense disclosed in March covering almost a half-million vehicles with fire risks and faulty door latches. That includes a $295 million charge for two recalls, one involving engines that could catch fire and the other involving door latches.

Operating cash flow improves marginally Ford Motor Company has generated cash of $4,336 million from operating activities during the quarter, up 4.51 percent or $187 million, when compared with the a year ago period.

The American automaker knew profits would suffer on the back of recalls and higher costs for warranties and materials. Analysts had expected $34.7 billion.

Ford anticipates its North American profit will decline from 2016 because of "headwinds on commodities and increased investment in emerging opportunities", though it expects the operating margin to remain relatively strong.

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Ford is coming off one of its most profitable periods in history with North America benefiting from two consecutive years of record USA auto and truck demand. Ford also said sales in China were weakening.

Looking ahead, for fiscal 2017, Ford continues to expect total company adjusted pre-tax profit to be about $9 billion, also a platform from which to build stronger results for 2018, led by gains in the core business.

Automotive revenue rose to $36.5 billion from $35.3 billion a year earlier. US retail share was up, reflecting higher share in trucks, utilities and Lincoln. Net profit for the first quarter decreased 36% from $2.5 billion, or $0.61 per share a year earlier to $1.6 billion, or $0.40 per share, but also beating analysts' expectations of $0.35 per share. Revenue rose slightly as the company sold a higher mix of high-profit trucks and SUVs.

Ford shares fell 13 cents, or 1.1 percent, to close Thursday at $11.47.

But the contrasts between Ford, which released its Q1 earnings report Thursday, and Daimler AG, which released its Q1 report Wednesday, illuminate the differences between a commodity automaker and one that deals primarily in luxury vehicles. "Plus (first quarter 2016) was a phenomenal quarter across the board for the industry in the USA and will be an nearly unfair comparison".

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