Ford Motor Co.’s net income for the first quarter of 2015 dropped by 6.6% to $924 million amid the cut in production due to the launch of its aluminum-bodied pickup. Ford had predicted that by remaking a huge portion of its global lineup, it will experience a “breakthrough year.” The automaker said that F-150 has been welcomed by industry insiders and consumers alike so that it will raise its profit margin projects in North America slightly.
However, the financial environment in South America has been worse than expected. The revenue in the quarter decreased by 5.6% to $33.9 billion. In a statement, Ford CEO Mark Fields said that the company had a good start to a year that’s expected to have increasingly stronger results as more of its new products are launched.
One of those new products that will push Ford to have a “breakthrough year” is the redesigned F-150, which makes up a majority of the brand’s profits, analysts claim. Ford started selling the truck at the end of last year; however, sales have been sluggish since it has been in short supply because of the plant changeover process.
Ford CFO Bob Shanks said that around 60,000 F-150 units were shipped, 40% lower than in the first three months of 2014. Even shipments of the newly redesigned Ford Edge crossover were cut by more than 50%. In North America, Ford reported earnings of $1.34 billion, 11% lower than the same period last year.
Its operating margins fell to 6.7% from 7.3%. At Ford’s headquarters, Shanks told reporters that at normal production rates, the profits in North America would have been higher by at least $1 billion and the margins would have been more than 10% easily. Shanks said that these are products that offer high margins and high revenues so there will be plenty of tailwinds by the second half of 2015.
Margins have become lower because of the F-150 and other introductions. These have also led to share decline in its market share in the U.S. Ford’s vehicle sales in the U.S. went up 2% in the first quarter; however, its share dropped half a point to 15%.
Ford has recently confirmed that it intends to drop 700 jobs and remove a shift at a small-car plant outside Detroit as low gasoline prices affect sales of the Focus and C-Max it assembles there.
However, Ford now said that it anticipates 8.5% to 9.5% margins in North America for the year, higher than its 8-9% earlier guidance mostly because consumers have picked out more high-priced F-150s than anticipated.
Shanks said that the company expects a share increase in North America over the rest of the year. A first quarter loss to $189 million was recorded, a 9 million drop.
It said that its full-year results would be better than the previous year but that it won’t be as good as predicted last January. Losses in Europe narrowed by 4.6% to $185 million. Last year, Ford lost $1.1 billion in Europe mostly because of issues in Russia, a market that General Motors said it will be letting go of.