F-150 costs pull Ford profits down

DEARBORN, Mich. — Ford’s new aluminum-sided F-150 will be a lot lighter and more efficient when it goes on sale later this year. But for now it’s a serious drag on profits.

Net income dropped 34 percent to $835 million in the third quarter, largely due to the cost of launching the pickup. The new F-150, which is 700 pounds lighter due to its aluminum construction, is scheduled to go on sale by the end of this year.

Ford has repeatedly warned investors that this year would be difficult financially. It’s launching a record 23 vehicles worldwide, including the F-150 and the new Mustang sports car that went on sale during the third quarter. It’s also building five plants in Asia and launching the luxury Lincoln brand in China.

Yet, investors keep showing signs of nervousness over the pickup truck gamble. After hitting a high of $17.84 in July, Ford’s shares have steadily declined. After the earnings report, the shares were down 4.1 percent to $13.78 Friday.

The F-Series has been the best-selling vehicle in the U.S. for 30 years; changing its body from steel to aluminum could be a game-changer for the industry, but it could also hurt Ford’s reputation — and profits — if the new material causes quality problems or doesn’t meet buyers’ expectations. Morgan Stanley analyst Adam Jonas estimates the F-Series accounts for 90 percent of Ford’s global automotive profits.

Chief Financial Officer Bob Shanks acknowledged that in the short term, Ford won’t be making the kinds of margins it usually sees on its pickups. The Dearborn and Kansas City plants won’t be fully operational until the second quarter of 2015, he said, and margins historically improve over the life of the truck.

But Ford CEO Mark Fields downplayed concerns, saying the company remains on track to start selling the truck by the end of this year.

“Launches are a complex thing, but we are absolutely on plan with the launch and it is progressing well,” he said. “We’re exactly where we expected to be at this point.”

Ford also cut back on current F-150 sales in order to preserve inventories while it readies the new truck. That hurt pretax profits in North America, which fell 39 percent to $1.4 billion. Sales in the region dropped 8 percent.

The company closed its Dearborn truck plant for five weeks during the quarter to change over to new equipment, contributing to $700 million in negative operating cash flow. Shanks said it was the first quarter the company has been cash flow negative since 2010.

Despite the bad news, Ford beat Wall Street’s expectations for the July-September period. Without one-time items, Ford earned 24 cents. That beat Wall Street’s expectation of 19 cents, according to analysts polled by FactSet.

Revenue fell 2.5 percent to $34.9 billion. That was better than the forecast of $33.7 billion.

Last month, Ford dropped its full-year pretax profit forecast to $6 billion, citing falling sales in South America and a $500 million charge for recalling 850,000 vehicles with defective air bags. That’s down from $8.6 billion last year.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.