At an investor’s conference yesterday, Ford lowered its forecasted profit for the calendar year 2014, reducing its projected pretax earnings by about 25 percent to approximately $6 billion. This resulted in Ford stock nose diving by close to 8 percent, even with the carmaker optimistic about its future prospects in the coming years.
Ford CFO Robert (Bob) Shanks pointed to several variables as the main reasons why it has lowered its guidance for the current year, including a $500 million loss resulting from a massive airbag recall that affected 850,000 vehicles. Shanks also cited unexpected losses in international market such as Russia and South America as another reason why projected profit figures have been revised downwards.
Deep-diving into the variables affecting Ford’s bottom line, the company is expected to lose $1 billion in South America alone, on account of economic woes in Argentina, Brazil, and Venezuela, which have in turn posed a negative effect on the regional economy. Over in Europe, geopolitical tension in Russia has been the main driver of reduced European sales, and a possible $250 million loss in Europe in 2015. As for the recalls, the 850,000 vehicles affected by the airbag problem include the 2013-14 Ford C-Max, Escape and Fusion, and the 2013-14 Lincoln MKZ.
For 2015, Ford has much better expectations, as it forecasts pretax profit to be in the neighborhood of $8.5 billion and $9.5 billion in the coming year, with success in the Chinese market likely to be the main variable driving improvement. Ford’s sales in China have improved 30 percent so far, and may continue to improve as it launches 15 new vehicles in the market by the end of 2015.