Ford’s fourth-quarter financials for 2019 were revealed yesterday and a lot of numbers, projections, and apologies were floated around. But with as much spin as was spent on the dismal Q4 results there was one figure missing from it all; 99. This is the percent of income that fell from 2018. A 99% plunge. In other words, Ford produced no profit for 2019. None. How does this happen?
Last year was going to be where Ford would launch “toward a really bright future,” according to company CEO Jim Hackett. But the launch of the all-new Ford Explorer turned into a fiasco. Ford’s best-selling SUV was plagued from the start with assembly problems. The result was SUV sales down 5%.
Ford’s response to the dismal financial revelations of 2019 left out one important point
In response to the terrible financial news, Hackett said, “We fell short of our financial expectations and yours in 2019. What is particularly disappointing is the primary reason for that shortfall was our operational execution. This is an area where we typically are effective.” What that means is that it botched the Explorer’s assembly. This caused shortages at dealerships and remedial corrections that cost millions of dollars to fix. This doesn’t even take into account the optics.
In trading, after the markets closed Ford stock shares fell by 9%. That loss in post-market trading wiped out 2019 gains. Last year was supposed to be the beginning of Ford’s turnaround which will cost $11 billion. It is restructuring its European business and trying to fix its tanking China profits. That will surely be compounded by the coronavirus situation.
2019 Ford Explorer launch is one of the main reasons for dismal news
The Explorer launch was a rush to failure. Assembly plant issues delayed deliveries for months. Deliveries to dealers dropped by 26% while Ford made remedial repairs. Issues included faulty seats, various wiring problems, and buggy software causing a host of issues. Thousands of assembled Explorers were taken by truck from the Chicago assembly plant to the Flat Rock plant near Detroit to receive fixes. Losses piled up.
Ford is hoping 2020 will finally fix many problems creating a financial hangover. The Mustang Mach E will hit the streets. An all-new F-150 goes into production at the Wayne manufacturing plant that received over $700 million before assembly begins. The much anticipated Bronco and baby Bronco will be revealed and begin production as well. And the Explorer should start hitting its stride.
Financial losses occurred in almost every country Ford operates in
Losses occurred in almost every country Ford operates in. Before interest and taxes, it lost $704 million in South America, $47 million in Europe, $23 million in Asia, $142 million in the Middle East and Africa, and $771 million in China. It closed six manufacturing plants in Europe last year. Ford also plans 12,000 layoffs there as well.
With the outbreak of the coronavirus, Ford has extended the Chinese New Year shutdown for an extra week. That is only the beginning of what will be a costly health scare for all manufacturing in China. It is unclear what effect this will have on 2020 profits.
Ford lost $1.672 billion in Q4 of 2019 and took a $2.2 billion charge on pensions. This and the other issues mentioned sucked all of the profit for 2019 away. Operating costs were $155 billion which was 1% less than in 2018. Before interest and taxes, it made $6.612 billion in the US last year.