DETROIT — Ford Motor on Wednesday reported a 57 percent drop in third-quarter net income and lowered its full-year profit guidance, citing anticipated higher warranty and incentive costs and weaker sales in China.
Chief Financial Officer Tim Stone said Ford now expects total 2019 earnings before interest and taxes of $6.5 billion to $7 billion, down from its earlier projection of $7 billion to $7.5 billion. That would represent a decline from the $7 billion earned in 2018.
"We think Q3 was a good quarter," Stone told reporters at Ford's headquarters in Dearborn, Michigan. "The progress we have made also indicates we have more work to do and more opportunity ahead. We think the trajectory is improving across the business."
Net income fell to $425 million in the quarter. Ford's performance was hindered by $1 billion in special charges related to its global restructuring, as well as charges from the creation of its joint venture in India with Mahindra. Global revenue fell 2 percent to $37 billion.
Third-quarter EBIT rose 8 percent from a year ago to $1.8 billion, as Ford's margin rose 0.4 percentage point to 4.8 percent.
Ford's North American profit rose 2.7 percent to $2.01 billion, but the company lost money in all other regions.
In the European market, where Ford is cutting 12,000 jobs, sales rose 3.1 percent in the third quarter in the traditional 20 markets on a surge in sales of its Focus small car and SUVs such as the Kuga. But the automaker lost $179 million in the period.
In China sales plunged there 30.3 percent in the quarter, as Ford works to update an aging product line and contends with the first slowdown in a generation in the world's largest auto market. It lost $281 million before interest and taxes in the quarter.
Ford Credit made $700 million in the quarter, while the automaker lost $300 million on its mobility ventures.
Stone said Ford is preparing for a worse-than-expected close to the year in part due to rising incentive costs.
“It’s a competitive environment,” he said. “There’s some new entrants with the SUV space and certainly in trucks as well. We want to provide outstanding value to customers, and our incentives are expected to be greater than planned.”
Joe Hinrichs, Ford’s president, automotive, said Ford needed to put higher incentives on three vehicles: the Edge crossover, Ranger midsize pickup and F-150 pickup.
The automaker has been working to resolve manufacturing issues with its redesigned Explorer large crossover. Although there are “many opportunities to improve” the launch, Stone said, volumes have reached expected levels, and the company is seeing improvement quarter over quarter.
Hinrichs admitted the company “took on too much” with the redesign of the Explorer and Aviator and a complete overhaul of its Chicago Assembly Plant. Still, he said reports referring to launch issues were “overly dramatized.”
CEO Jim Hackett also denounced the reports, saying he was “not happy with the press’ view of the way we’ve worked through this.”
Reports focused on Ford’s decision to ship vehicles that needed rework to the Flat Rock Assembly Plant in Michigan. Hackett noted that was not out of the ordinary, especially considering the lack of physical space in Chicago and Flat Rock’s capacity, given it produces the low-volume Lincoln Continental and Mustang.
“Flat Rock was not evidence of chaos, it was evidence of us making things right,” he said.
Ford also is dealing with fallout from faulty dual-clutch transmissions in its now-discontinued Focus and Fiesta sedans, which is contributing to increased warranty costs, Stone said.
Hackett said that while Ford “has a handle” on the DPS6 issues, he said it might be some time before those results show up.
“The product development process has been redesigned,” he said. “The benefits of all that are in the next generation of products.”
Bloomberg contributed to this report