Ford expects launch costs to eat into 2014 pretax profit

Article by Anita Panait, on December 20, 2013

Ford Motor Co. is expecting a drop in pretax profit in 2014 as it spends more to launch new vehicles to the market. Ford expects to post a pretax profit of between $7 billion and $8 billion in 2014, a drop from an estimated $8.5 billion pretax profit for 2013. The US carmaker recently said that it is planning to introduce 23 new vehicles globally next year.

Ford’s latest outlook could be seen as a gamble for continued growth while it gets ready for a possible exit by chief executive Alan Mulally next year. Carmakers typically have to lower the prices of outgoing models when as they introduce new ones and have to incur additional costs related to retooling and preparing plants for the production of new and updated vehicles. 

“In 2014, we are investing across the world to support next year’s launches, but also to drive profitable growth beyond 2014 as we serve more customers in more markets and in more segments,” chief financial officer Bob Shanks said in a statement.

“It’s a very competitive business,” Shanks told reporters and analysts following a presentation in New York. He remarked that since it is impossible to sustain any competitive advantage, it is always the right move to try and find that next thing where, for a period of time, a carmaker can separate itself from the others.

Ford is taking a gamble that its new models would result to more revenues in 2015. Ford has said that Mulally is expected to remain at the top through at least 2014, but people privy with Microsoft’s CEO search have said that he is one of the candidates for the post. Mark Fields, who was promoted as chief operating officer in December 2012, is seen as the lead successor to Mulally.

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