The stock price of Ford Motor Company (NYSE:F) declined more than 7% to $15.11 per share after informing investors that it may not be able to meet its target profit for the full-year 2014.
Ford lowers pretax profit forecast
During a conference with investors, Ford Motor Company (NYSE:F) said it expects to report a pretax profit of $6 billion this year. The management previously estimated that the company would be able to achieve pretax profit in the range of $7 billion to $8 billion.
Profits in North America are not enough to offset troubles in other regions
Ford Motor Company (NYSE:F) CFO Bob Shanks explained that the company’s profits in North America are not enough to offset its losses in South America. Last year, the automaker recorded $1 billion losses in the region.
Continued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More
This year, Ford Motor Company (NYSE:F) is confronting a similar problem in Russia. The sales of the automaker in the country were declining and the rapid decline of the Russian currency negatively impacted its business.
In addition, the warranty costs were higher than expected this year. Ford Motor Company (NYSE:F) recalled 850,000 vehicles due to defective airbags last week. The company’s warranty costs included a $500 million charge related to last week’s recall.
Shanks said, “We know this year is going to be short of plan, but we also have to keep an eye on the future.”
Ford expects to generate higher pretax profit in 2015
Shanks told investors that Ford Motor Company (NYSE:F) is expected to generate higher pretax profit in the range of $8.5 billion to $9.5 billion in 2015. The automaker expects to recover from its losses in South America next year.
Ford Motor Company (NYSE:F) also anticipates improvement in warranty costs. In addition, the management of the automaker plans to launch 16 vehicles next year, down from 23 vehicles this year. The introduction of fewer vehicles will reduce its costs.
Over the long-term, Ford Motor Company (NYSE:F) expects to obtain a global sale growth of 55% by 2020. The automaker’s expected sales growth is based partly from its strong vehicle demand in Asia. The company is planning to open five plants in the region next year.
Ford Motor Company (NYSE:F) expected to generate $700 million in pretax profit from Asia-Pacific. The automaker expects higher pretax profit in the region next year with margins increasing between 12% to 14% by 2020.
In addition, the company estimated that the auto industry sales in the Asia-Pacific will increase to around 51 million to 53 million vehicles by 2020. The automaker’s management forecasted that China will account 29 million to 31 million vehicle sales in 2020.