Wrapping up one of the best years in its history, Ford Motor F -7.37%said today that 2014 will be another solid year, but that margins will be lower because of the cost of launching a record 23 new models worldwide and its continued global investments in new factories.
Ford said total company pre-tax profit in 2014, excluding special items, would be about $7 billion to $8 billion, down about 6 to 8 percent from this year’s expected $8.5 billion pre-tax profit.
Ford also backed off its mid-decade guidance, citing tougher market conditions in Europe and South America. Though it generally remains on track to sell 8 million vehicles worldwide (a 50% increase from 2011), and cut its debt to about $10 billion, Ford warned it might not be able to achieve its target operating margin of 8 percent to 9 percent (up from 6.1 percent in 2010). The automaker already announced a restructuring plan for Europe and said new products in Brazil and Argentina should help, but that a devaluing of Argentina’s currency had created market havoc.
The unusual earnings guidance announcement could be a precursor to the early departure of Chief Executive Alan Mulally, said Joseph Amaturo, an analyst with Buckingham Research Group, in a note to investors. He speculated that Ford wanted to get the bad news out before Mulally’s likely successor, President Mark Fields, takes over as CEO. Mulally is widely believed to be a candidate to succeedSteve Ballmer as CEO of Microsoft MSFT -1.9%.
Ford called 2014 “a critical building block” for its future. “This is our most ambitious launch plan ever, as we continue to implement our One Ford plan,” said Chief Financial Officer Robert Shanks. “In 2014, we are investing across the world to support next year’s launches, but also to drive profitable growth beyond 2014 as we serve more customers in more markets and in more segments.
Besides pressure in Europe and South America, Ford said its core North American business will also face headwinds in 2014 as it rolls out 16 new models, triple the number it launched in 2013. The sell-down of older models as it ramps up production of new vehicles like the redesigned F-150 pickup and Ford Mustang, will result in lower wholesale volumes and more discounting, the company said. The company also expects
competition for small and medium cars and utilities to continue, especially as Japanese makers take advantage of a weaker yen.
competition for small and medium cars and utilities to continue, especially as Japanese makers take advantage of a weaker yen.
“The payoff for North America from the 2014 launches and investments we incur for future periods will be a stronger product lineup and volume and revenue opportunities into 2015 and beyond,” said Shanks. He said North America 2014 pre-tax profit will be lower than in 2013, with an operating margin of 8 percent to 9 percent, at the lower end of its earlier projected range.
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