Financially speaking, Ford didn’t exactly have a banner year in 2014, but 2015 could be a much different story. The company released its fourth-quarter and 2014 results, and from an outsider’s perspective, there wasn’t much to write home about. Ford’s earnings in the fourth quarter were $52 million, down a whopping $3 billion from 2013’s fourth quarter. But that didn’t happen without good reason, and it wasn’t unexpected.
In fact, Ford beat many analysts’ expectations, causing shares to actually trend upward as a result of the news. As for why the company took such a beating on the balance sheet, it’s because a good portion of Ford’s earnings have gone toward recalibrating and refitting its factories for an onslaught of new and improved models.
Speaking with CNBC, Ford CFO Bob Shanks was adamant that the company’s weak earnings were not a surprise. “We said more than a year ago that this year was going to be different,” he said in reference to Ford’s preparations for the new aluminum-built F-150, as well as additions to its performance line. “We were going to see a lot of effects from an unprecedented introduction of new products last year.”
And those effects were obvious. There were declining sales numbers in international markets, like the always-confounding South America, as well as Europe. Last year, Ford was able to take a special tax break to help its fourth-quarter earnings, which it did not have the option to take this year. With considerable resources being invested over 2014, combined with a few drawbacks, America’s No. 2 automaker made out OK, all things considered.
But it does set up Ford for a hell of a year in 2015 and beyond.
Shanks expects the turnaround to be rather quick, with Ford’s factories returning to full production by the year’s second quarter. “We’re in the process of launching in Kansas City, and using everything we learned in Dearborn, that one is going very smoothly, as well,” he said on a call with Autos Cheat Sheet. “I think in the second quarter, we’ll be in good shape.”
Shanks has reason to be confident. Ford caused quite a stir last year when it announced that it would be building its longtime best-selling truck, the F-150, with aluminum body components, rather than the traditional steel. It was considered to be a gamble, but consumers seem to be buying in. Not only that, but it looks like Ford is also going to be going after the performance segment incredibly hard, showing off a handful of the many new expected performance vehicles, including the new GT and a rehashed Raptor F-150.
Sales of the freshly redesigned Mustang pony car — which is Ford’s consummate performance machine — have also impressed so far. It’s a good omen considering what the company has in store for consumers in coming years.
“I think we’ll continue to expand our performance lineup,” Shanks said when asked whether the Mustang’s success will lead to further investment in the performance segment. “We’ll see more of it across the lineup. It’s very good for the brand. It brings in different kinds of consumers, higher-income consumers.”
While the entire Ford brand may not be redirecting its focus on higher-income consumers, it’s obvious that Ford is taking steps to not only improve the engineering and performance of its vehicles but also the technology and innovative features that operate behind the scenes. It was recently announced that Ford opened a new research and development center in the heart of Silicon Valley in order to spur along innovation and experiment with autonomous technologies, among other things.
“Growing the Palo Alto team will strengthen our global research prowess and drive innovation needed to meet the needs of our customers in the future,” said Ken Washington, vice president of Ford Research and Advanced Engineering. “Working together with the Silicon Valley research community will spark the new ideas, products and services that will help Ford once again change the way the world moves.”
Again, Ford may have had some setbacks in 2014, but it looks like all of the company’s investments and re-strategizing will pay off big in coming years. Add Ford’s presence in the middle of Silicon Valley as the cherry on top, and the company looks primed for takeoff.
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