Friday 26 December 2014

Ford posts weaker-than-expected profit as warranty costs rise

Published 25/04/2014 | 13:26

Ford Motor Company Executive Chairman Bill Ford stands on top of the observation deck at the Empire State Building with the new 2015 Mustang convertible in honor of 50 years of the Ford Mustang in New York City. In 1965 a prototype Ford Mustang convertible made its way to the top of the observation deck. This time the iconic American car had to be brought up in parts and assembled on location. The Mustang will be on display for two days in celebration of the kick-off of the 2014 New York International Auto Show.
Ford Motor Company Executive Chairman Bill Ford stands on top of the observation deck at the Empire State Building with the new 2015 Mustang convertible in honor of 50 years of the Ford Mustang in New York City. In 1965 a prototype Ford Mustang convertible made its way to the top of the observation deck. This time the iconic American car had to be brought up in parts and assembled on location. The Mustang will be on display for two days in celebration of the kick-off of the 2014 New York International Auto Show.

Ford Motor Co posted lower-than-expected first-quarter profit today as the second biggest car maker in the US experienced warranty costs in North America for older vehicles by $400 million.

The company affirmed its forecast for pretax profit for 2014, a year in which it is launching a record 23 new vehicles globally. It also said it is amending and extending its revolving credit facility.

While Ford adjusts its warranty reserves every quarter, Chief Financial Officer Bob Shanks said the total was larger in the first quarter because the company has seen more field service actions, such as safety recalls and addressing customer complaints, over the last two years. He said that was a trend in the industry as vehicles become more complex.

Net income fell 39 percent to $989 million, or 24 cents a share, from $1.61 billion, or 40 cents a share, in the year-earlier period.

The quarter included the $400 million in additional costs for warranty reserves in North America for vehicles from as early as the 2001 model year, and $100 million in costs related to higher freight and other items due to the quarter's harsh winter in North America. It also included previously disclosed costs of $400 million, mostly due to the currency devaluation in Venezuela. All three items totaled 17 cents.

Excluding one-time items for European restructuring, Ford earned 25 cents a share, 6 cents below analysts' estimates in a poll by Thomson Reuters I/B/E/S, or about the same amount as the warranty reserves. Weather costs accounted for another two cents.

Ford, which still expects a pretax profit this year in the range of $7 billion to $8 billion, said its credit facility is expected to grow to about $12 billion, from $10.7 billion after its completion at the end of the month.

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