DETROIT -- Ford Motor Co. today said it expects profits to decline next year, as it increases investments in autonomous vehicles and new technology, before rebounding in 2018.
CEO Mark Fields pitched the automaker to investors and analysts at a daylong conference as a “solid investment with attractive upside.”
Fields, who is pushing the automaker into mobility services such as ride-sharing as a hedge against the potential for auto sales to decline in the future, said Ford expects “emerging opportunities” to eventually generate profit margins of at least 20 percent, well above the 8 percent it projects for its core automotive business in the long term.
He said Ford is positioning itself to withstand threats ranging from competitors in Silicon Valley to the next downturn in the U.S. auto market.
“It’s not about moving from an old business to a new business. It’s moving to a bigger business,” Fields said. “Our core business is robust and also defensible. It’s much more fit to withstand the next industry downturn than I think it ever has been in the past.”
Ford outlined three ways it plans to improve its business: increasing sales of its lucrative trucks and SUVs; making small cars, luxury vehicles and emerging markets more profitable; and investing in electrification, autonomy and mobility.
As part of that effort, Fields confirmed that Ford would shift all of its U.S. small-car production to Mexico, a move that has been widely reported since the company told UAW members last summer that assembly of the Focus and C-Max would end in Michigan by 2018. The cars are expected to be made in a $1.6 billion plant Ford announced for Mexico in April.
Ford also is reducing complexity in small cars, cutting the number of configurations for a Focus from 200,000 in 2015 to 30 after the car is redesigned in 2018.
Executives said Ford is aiming to reduce costs in its core operations by $3 billion annually in each of the next three years, largely offsetting its increased investment in mobility.
They said adjusted pretax profits for its core business would improve every year from 2016 through 2018 but that total earnings would decline next year due to higher investments and costs related to emerging opportunities. The company expects an adjusted pretax profit of $10.2 billion this year, 5.6 percent less than the $10.8 billion it earned in 2015.
It reduced its outlook for 2016 last week after expanding a regional recall of faulty door latches to cover vehicles nationwide at the request of federal regulators. The recall, now covering more than 2.3 million vehicles, is expected to cut third-quarter profits by $640 million, Ford said.
“We expect Ford’s performance to be strong through 2018 -- with our core business improving, allowing us to invest in the emerging opportunities that will ensure our future success,” Ford CFO Bob Shanks said in a statement.
“Our capital allocation continues to be disciplined and to deliver strong returns, and we are fully prepared for a downturn. As a result, we plan to offer a secure regular dividend through the business cycle with an option for upside on investments to keep our core business strong and to win in emerging opportunities.”