DETROIT — Ford Motor Co.'s second-quarter net income plummeted 86 percent to $148 million as the automaker took special charges related to its ongoing global restructuring and made costly updates to high-volume utility vehicles.
But excluding the one-time items, Ford's earnings before interest and taxes fell just 2 percent from a year earlier, to $1.65 billion. North American earnings of $1.7 billion were down 3 percent from the same period a year ago. Ford's margin in North America was 7.1 percent, down 0.3 percentage points from the second quarter of 2018 amid executives' push to achieve a double-digit margin for the region.
Globally, revenue was $38.9 billion, unchanged from the same period a year ago. Ford's overall profit margin fell 2.4 percentage points to 0.4 percent.
"The underlying performance trends are strong," Tim Stone, who became Ford's CFO on June 1, said. "The fundamental redesign efforts are progressing and showing benefits."
Global restructuring actions in Europe and South America, including plant closures and job cuts, accounted for virtually all of the $1.2 billion in special charges during the quarter.
The automaker last month said it would cut 12,000 jobs in Europe by the end of 2020 and reduce its manufacturing footprint from 24 plants to 18.
Ford shares closed down 77 cents, or almost 8 percent, at $9.56 in trading Thursday, after the automaker said it expects adjusted earnings for the year to fall short of analyst estimates.
Ford also said it expects earnings before interest and taxes of $7 billion to $7.5 billion, which could represent growth of up to 7 percent. The automaker previously only said there would be improvement. It also reiterated a prediction that free cash flow would increase.
Overseas, mobility losses
The automaker’s earnings in Europe nearly tripled to $53 million, the first time it’s posted a year-over-year quarterly increase in two years. It made $30 million in Asia Pacific, down 66 percent from the same period a year ago. But other regions were in the red. It lost $45 million in the Middle East and Africa, $155 million in greater China, and $205 million in South America.
Ford Credit posted earnings of $831 million, up 29 percent year-over-year.
“I’m pleased with the progress we’re making toward creating a more dynamic, innovative and profitably growing business,” CEO Jim Hackett said on a conference call.
“We view all of this progress with humility. It’s been my experience that the compounding positive effects of getting so many aspects of our business in shape does take more time. Yet at the same time these disparate aspects build on each other which allows us to reach our full potential as an outstanding business.”
Ford’s mobility business sapped $264 million from earnings, 46 percent more than a year ago. It also lost $181 million related to an investment in cloud-based software company Pivotal and lost $79 million on autonomous vehicle development, including the cost of adding employees to Argo AI, its robocar development partner. Ford said Argo’s staff has grown 50 percent year-over-year.
Ford’s wholesale sales in North America fell 7 percent, including a 72,000-unit decline for the Explorer, which has been redesigned for the 2020 model year. But revenue in the region grew 1 percent as a more profitable sales mix offset the lower volume.
Stone called the redesigned Explorer, built at Ford’s Chicago Assembly Plant, the company’s “most complex” launch in the next 18 months as it updates a majority of its product portfolio.
The vehicle was Ford’s third-best selling U.S. nameplate last year, behind the Escape and F-series pickups. It’s moving to a new rear-wheel-drive platform and will include a hybrid powertrain option.
Hackett said the changeover was a “bigger endeavor” than overhauling its pickup plants in Dearborn and Kansas City earlier this decade to make the aluminum-bodied F-150.