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China, Europe issues force Ford Q2 profit down

Ford Motor Company (F) reported declines in revenues and earnings for the second quarter of 2018 due to certain production disruption issues at a parts supplier as well as challenges in the China market. Total revenues declined 2.2% to $38.9 billion from the same period last year.

Net income dropped to $1.1 billion or $0.27 per diluted share from $2 billion or $0.51 per share in the prior-year period. Adjusted EPS was $0.27 in the quarter. The company’s quarterly results missed market expectations.

Revenues in the Automotive Segment dropped to $35.9 billion from the prior-year quarter. Business in North America remained strong, with F-Series sales topping 236,000 units in the second quarter. Although a fire briefly impacted production at one of its suppliers, measures were taken to restore operations quickly.

Ford had a challenging quarter in Asia Pacific and Europe. Due to this, the company lowered its adjusted EPS guidance for the full year of 2018 to a range of $1.30 to $1.50.

Ford Motor second quarter 2018 earnings
Ford Q2 2018 Earnings Infographic

Ford is redesigning its business models by reallocating capital to high-return projects, restructuring, and strategic partnerships. These activities are expected to have potential EBIT charges of $11 billion, with cash-related effects of $7 billion, over the next 3-5 years.

On Tuesday, Ford announced the spinoff of its self-driving business into a separate company named Ford Autonomous Vehicles LLC. This decision was taken to grow its self-driving business faster and to take advantage of market opportunities. Ford will invest $4 billion in this company until 2023.

Ford’s disappointing quarterly results, combined with the guidance cut, sent shares down over 3% following the earnings release. Earlier in the day, Ford’s rival General Motors (GM) reported results with lower profit guidance for the year. The auto industry expects negative impacts from the tariff issues going on between the US and China.

Related: Ford Q1 earnings beats estimates, plans more savings

Related: Ford tops US carmakers in auto quality ranking

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