Carmaker giant Ford has reported weaker-than-expected second quarter profits, in the face of stagnant United States sales and a tougher market in China.
Bob Shanks, Ford's chief financial officer, added noted that despite the sluggish quarter, the company's balance sheet received positive reviews from credit rating agencies in the form of "upgrades over the past few months".
"We see next year's industry will be weaker than this year", Mr. Shanks said regarding the USA market. Consumer demand has gone slack, forcing automakers to dial up deals to lure buyers to showrooms. Top luxury electric vehicle maker Tesla Motors (TSLA) and No. 1 global automaker Toyota Motor (TM) edged lower.
- North American pretax income was $2.7 billion down from $2.84 billion a year earlier.
On Wall Street, stocks initially were dragged lower by Ford Motor F.N , which posted poor second-quarter profit, as the US market was range-bound for a second week. That missed Wall Street's expectation of a proft of 60 cents per share, according to analysts polled by FactSet.
July U.S. new auto sales bounced back to an annualized rate of 17.5 million on strong holiday weekend sales - and increased incentives and continued leasing growth, Kelley Blue Book estimated Thursday.
In the second quarter, Ford reported margins of 5.8 per cent in Europe, up from 2.3 per cent a year earlier, lifted by record European profits on the back of strong sales.
Global stock markets fell on Thursday in the wake of disappointing U.S. and European corporate results while the dollar took its biggest tumble in nearly two months after the U.S. Federal Reserve left unclear when it will raise interest rates. "The risk is when does all that all come crashing down. That's the squeeze that I'm anxious about", Swanson said. Shanks said that "mix" - the ratio of more profitable products (SUVs, highly optioned models) to less profitable products - drove about $182 million of the year-over-year gain. The automaker now sees US auto sales of 17.4 million to 17.9 million vehicles, down from an earlier forecast of about 18 million.
Strong sales in its flagship truck, the F-150, couldn't haul enough profits to offset the 9% decline Ford Motor Co.
GM and Fiat Chrysler, however, are taking more positive stands, forecasting continued strength in US and North American vehicle demand. "This has resulted in higher industry incentives.as various competitors protect their share". "The industry increased and we increased in line with the industry".
"Profits aren't likely to move up from here and are likely facing downside risk", Brian Johnson, a Barclays analyst who rates Ford the equivalent of neutral, wrote in a June 10 note. Rival General Motors said the Brexit could cost the automaker more than $400 million during the second six months of 2016.
"We're going to have to look more at cost", he said.
Shares of Ford and other USA automakers fell sharply following the Ford outlook, which contrasted sharply with the sunny view offered last week by rival General Motors.
Although Ford's core North American market continues to power results, with the company posting an 11.3% operating margin for the region, that was lower than the 12.2% reported in the same period a year ago.
Some investors remain wary of the stock on the belief that earnings are peaking and will decline along with the USA auto market.