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Ford sees lower results as it bolsters line up

Sep 14 2016 16:00
Keith Naughton, Bloomberg News

The 2015 Ford Mustang 50 Year Limited Edition is introduced at the 2014 New York International Auto Show at the Javits Convention Centre, in New York. (Richard Drew, AP, file)

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Michigan - Ford Motor Company said its financial results will decline next year before rising in 2018 as it boosts spending on new businesses like electric and driverless cars while fixing weaknesses in luxury autos and emerging markets.

The automaker didn’t provide specific financial targets in a statement ahead of today’s scheduled investor-day presentations. Still, its guidance contrasts with average analyst estimates in a Bloomberg survey for adjusted earnings per share to rise by a penny next year, to $1.84, and for adjusted net income to rise to $7.45bn from $7.37bn.

Ford, which is launching its first self-driving car in 2021, said it expects autonomous vehicles to be 20% of its sales by the end of next decade.

It also is investing $4.5bn as it works to introduce 13 new electric vehicles, accounting for 40% of its line up by 2020.

It also is buttressing its business in traditionally weak areas, including expanding its Lincoln luxury line up, improving profitability on its small cars and investing in struggling emerging markets including Russia and South America. Ford said it is "re-evaluating" its strategy and business model in India.

Ford’s shares fell 12% this year through on Tuesday amid signs that the US auto market has peaked and the profit records appear to be over.

Some investors also uncertain about how the 113-year-old automaker will fare against new competition such as Alphabet’s Google self-driving car and other Silicon Valley technology companies moving into mobility. Ford shares fell about 1% to $12.25 in early trading Wednesday.

"Our capital allocation continues to be disciplined and to deliver strong returns, and we are fully prepared for a downturn," chief financial officer Bob Shanks said in Wednesday’s statement.

"As a result, we plan to offer a secure regular dividend through the business cycle with an option for upside on investments to keep our core business strong and to win in emerging opportunities."

Cost reductions

The second-largest US automaker said it plans to reduce costs annually by $3bin between this year and 2018. It expects to remain cash-flow positive through 2018 and to keep a cash balance at or above $20n.

It’s targeting 8% margins for its traditional automotive business and margins of 20$% or more for "emerging businesses."

Record earnings and a plan for rolling out robot cars haven’t stopped investors from punishing Ford stock for more than two years.

The Dearborn, Michigan-based automaker lowered its 2016 pretax profit forecast last week to $10.2bn from at least $10.8bin because of the cost of an expanded recall of faulty door latches.

"As we expand to be an auto and a mobility company, we’re not moving from an 'old' business to a 'new' business.

We’re moving to a bigger business," chief executive officer Mark Fields said in the statement.

'The world is moving from simply owning vehicles to owning and sharing them. That’s why we are expanding to sell more vehicles and provide transportation services at the same time."

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