Ford posts Q4 loss, gives disappointing 2020 outlook

Dearborn, Michigan

FORD Motor Co delivered a weaker-than-expected 2020 forecast, warning of higher warranty costs, lower profits at its credit arm and continued investments in future technology such as self-driving cars.

"The results were not OK in 2019," Ford chief financial officer Tim Stone told reporters at the company's headquarters outside Detroit.

"As I look to 2020 and beyond, I'm very optimistic," he said, while cautioning that Ford's lower guidance does not yet account for the potential impact of the coronavirus outbreak in China.

In an after-hours call with financial analysts, chief executive Jim Hackett was more blunt about the challenge of balancing Ford's protracted turnaround efforts with its continuing work on future technology, including electric and self-driving cars.

"I don't think this company can keep straddling the old and new worlds forever . . . This company has to change," Mr Hackett said.

Ford said it expects 2020 operating earnings to be in the range of 94 cents to US$1.20 a share.

Analysts were expecting US$1.26 a share.

Mr Stone said Ford expects to continue its quarterly dividend of 15 cents, which could cost the company US$2.4 billion in 2020.

Asked about continuing the dividend after lowering its 2020 guidance, Mr Hackett said: "We like to return value to shareholders."

The disappointing 2020 forecast, coming after Ford previously trimmed its 2019 outlook, is a blow for Mr Hackett, who took the helm in May 2017.

He has been asking investors to be patient with a restructuring that has seen the formation of a wide-ranging alliance on commercial, electric and autonomous vehicles with Volkswagen AG and the sale of its money-losing operations in India to a venture controlled by India's Mahindra & Mahindra.

But by Ford's own accounting, the restructuring is far from complete. It has booked US$3.7 billion of the projected US$11 billion in charges it previously said it would take, and expects to book another US$900 million to US$1.4 billion this year.

For the fourth quarter of 2019, Ford reported a net loss of US$1.7 billion, or 42 cents a share, compared with a loss of US$100 million, or 3 cents a share, a year earlier.

The quarter included a loss of US$2.2 billion due to higher contributions to its employee pension plans, something it disclosed last month.

Revenue in the quarter fell 5 per cent to US$39.7 billion, above the US$36.5 billion Wall Street had expected.

Ford's adjusted free cash flow fell 67 per cent in the fourth quarter to US$500 million, including the US$600 million cost of bonuses related to a new labour deal with the United Auto Workers union.

The UAW deal also played a role in driving North American automotive profit margins down to 2.8 per cent in the fourth quarter.

Ford said its operating losses in China last year totalled US$771 million, including a loss of US$207 million in the fourth quarter. It lost US$1.5 billion in 2018. Ford's market share in China in the fourth quarter fell to 2 per cent from 2.3 per cent last year.

In December, Ford said it would halve its operating loss in 2019 and nearly halve it again in 2020, followed by further improvement in 2021.

However, that forecast was before the appearance of the fast-spreading coronavirus and its crippling effects on China's economy.

Ford's China sales fell about 15 per cent in the fourth quarter and 26 per cent for the year as it continued to lose ground in its second-biggest market.

Ford has been struggling to revive sales in China since its business began slumping in late 2017. REUTERS