Ford’s profits fall 35% amid recalls, lower sales and a plant cancellation in Mexico
Ford Motor Co.’s profit fell 35% to US$ 1.6 billion -or US$ 0.40 per share- in the first quarter, affected by costly recalls, lower sales and expenses related to the cancellation of a plant in San Luis Potosi, Mexico.
Ford Chief Financial Officer Bob Shanks said more hurdles remain ahead in the year, including lowest profits for the third quarter because of scheduled plant closures and rising costs for steel and other materials. However, the company remains on track for a pretax profit of US$ 9 billion for the full year, down from US$ 10.4 billion in 2016.
Ford listed US$ 467 million in warranty costs for the quarter, including two product recalls in March that cost the company US$ 295 million. The company recalled more than 360,000 vehicles due to the risk of engine fires and 210,000 vehicles for defective door latches.
Sales dropped slightly in the first quarter to 1.7 million vehicles. Ford’s North American said it sold fewer vehicles to rental fleets, but it sales to individual buyers were up.
In North America, the company earned a pretax profit of US$ 2 billion in the region, down 45% from a year ago. Revenue rose slightly as the company sold a higher mix of high-profit trucks and SUVs. Ford said the average price customers paid for a vehicle was up US$ 1,971 in the U.S. in the first quarter, compared to an industry average increase of US$ 506.
Ford’s loss on its aborted plant in San Luis Potosi totaled US$ 153 million, 23% less than the US$ 199 million originally booked.
The US$ 46 million difference came from re-using parts and equipment that Ford had already booked as part of the site’s initial construction.