(Adds details on quarter, updates stock price)
By Nick Carey
DETROIT, April 27 Ford Motor Co reported a
lower quarterly net profit on Thursday but beat analyst
expectations amid higher commodity, engineering and recall
costs, and a drop in vehicle sales
Ford shares were down slightly at $11.54 in early trade.
The No. 2 U.S. automaker, which reiterated its pretax profit
forecast for 2017, warned investors in late March that higher
costs and lower sales volumes would hurt quarterly earnings.
Chief Financial Officer Bob Shanks told reporters at the
company's headquarters in Dearborn, Michigan, that additional
costs made this the "toughest quarter" for 2017.
Shanks said Ford's results for the rest of the year would be
"about flat to a little bit better" compared with 2016.
The company's results come at a time of uncertainty for the
U.S. auto industry following disappointing sales in March.
While sales of new vehicles have risen since the end of the
Great Recession and hit 17.55 million units in 2016, analysts
expect a slight sales decline in 2017. Ford said Thursday it
expects industrywide sales to decrease a little this year and in
Ratings agencies have warned of worsening credit and there
are concerns millions of nearly new leased vehicles due to flood
the market over the next couple of years will depress used-car
values and hurt U.S. automakers' sales.
Shanks said Ford's own used-car values at its finance arm
were down 7 percent compared to the same quarter in 2016, but
said customers' credit scores remained high and we "feel really
good about where credit is."
"Clearly we're moving to a different stage of the cycle, but
we think based on what we know that we’ve got it covered,” he
Ford's costs during the first quarter were hurt by two
recalls in North America, one to replace potentially faulty side
door latches and the other for under-hood fire risks. The
company said it expects to spend $295 million to fix those
Ford expects commodity costs to be around $1 billion higher
this year. Shanks said around half of that will be due to higher
Ford maintained its expectation for a full-year 2017 pretax
profit of around $9 billion, down from a record of $10.4 billion
The company reported a first-quarter net profit of $1.6
billion, or 40 cents a share, down 36 percent from $2.5 billion,
or 61 cents per share, a year earlier. Analysts had, on average,
expected earnings per share for the quarter of 35 cents.
Automotive revenue rose to $36.5 billion from $35.3 billion
a year earlier. Analysts had expected $34.7 billion.
(Editing by Bernadette Baum, Bernard Orr)