Daily Management Review

Fourth Quarter Loss Of $1.7 Billion And Weak 2020 Forecast Reported By Ford


Fourth Quarter Loss Of $1.7 Billion And Weak 2020 Forecast Reported By Ford
Worse than expected fourth quarter results from Ford pushed its shares down by 9.5 per cent pm Tuesday. The United States based auto major made a loss during the quarter and its forecast for 2020 was well below the market expectations. The company blamed higher warranty costs, investments in future looking transportation and lower results from Ford Credit for the poor performance and lower than expected forecast for 2020.
"The results were not OK in 2019," Ford Chief Financial Officer Tim Stone told reporters at the company's headquarters outside Detroit. "As I look to 2020 and beyond, I'm very optimistic."
The company now expects that its operating earnings for 2020 to be in the rage of 94 cents to $1.20 a share, said the second largest automaker of the US. Analysts expected operating earnings of $1.26 a share.
For Chief Executive Jim Hackett, this worse than expected forecast for 2020 was a blow especially after the company had previously lowered its outlook for 2019. Hackett took over the reign of the company in May 2017 following a sudden departure of Ford veteran Mark Fields. Hackett was formally the head of furniture maker Steelcase.
Since taking over, Hackett has instituted a restructuring plan which included creating a wide-ranging alliance on electric vehicles with Volkswagen AG as well as the divestment of its loss making business in India to one of its rivals there Mahindra & Mahindra. Hackett has thus been requesting investors to have patience till the restructuring process was completed as the company has ‘already out. 
The company had earlier projected that the restructuring would cost $11 billion in charges and it has already taken a hit of about $3.7 billion in charges. Ford has said that this year, it expects to book another $900 million to $1.4 billion in charges.
A net loss of $1.7 billion, or 42 cents a share was reported by the company for the fourth quarter of 2019 compared to a loss of $100 million, or 3 cents a share, in the same period a year ago.
The company said that during the quarter it had to bear a loss due to higher contributions to its employee pension plans which amounted to $2.2 billion. That program had been disclosed by the company just last month.
Ford earned 12 cents a share excluding one-time charges which was three cents lower what what the market was expecting.
There was also a 5 per cent drop in revenue in the quarter at $39.7 billion which was however over the market expectations of $36.5 billion.
Citing higher warranty and incentive costs, as well as lower-than-expected sales in China, the company had brought down its profit outlook for 2019 in October.