Ford may be suffering from low demand in key global regions, but if 2019 is to show improvement investors will need reassurances that its global restructuring plan is on track.
Ford Motor Co., the global automotive giant, recently announced disappointing fourth quarter and full-year results for 2018, with EBIT (earnings before interest and taxes) losses in every region, except North America.
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Speaking to reporters outside the company’s Detroit headquarters, Ford’s Chief Financial Officer, Bob Shanks, described 2018 as “not a year we were happy with”, acknowledging the likelihood of further disruptions and strikes during its continuing restructuring.
The company suffered global EBIT shrinkage of 31% down to $1.1 billion in Q4 and across 2018 EBIT shrunk by a third – down to $5.4 billion – on the previous year, driven primarily by considerable losses in the Asia-Pacific region of more than $1.7 billion compared to 2017. Revenues also struggled, growing globally by a mere 1.8% to $148 billion.
North America
North America is the only region where Ford performed well, with revenues up 3.3% (at approximately $3 billion).
Sluggish global growth and continuing uncertainty underscore Ford’s poor performance, not only in emerging markets but in traditional markets too.
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By GlobalDataThe uncertain outlook for global business and trade spells slowing demand for the automobile sector.
Chinese economic slowdown
Ford struggled in Asia primarily due to sluggish sales in China, where slower-than-expected economic growth has taken many industries and manufacturers by surprise. Chinese gross domestic product growth slowed to 6.6% in 2018, the lowest since 1990, and many industries have been feeling the pinch.
China is hugely influential both on the world stage and in the Asia-Pacific region, making it crucial for Ford to expand there. The slowdown has harmed Ford’s performance, with the carmaker noting a 32% decline in sales volumes and a 12% decline in revenues in the region.
Similarly, across Europe, economic growth has been slow and consumer confidence low. Political upheaval and uncertainty in recent years have impacted heavily on the sales of new cars. By volume, sales in Europe for Ford were down 3.1%.
Low confidence in restructuring plan
Though Ford’s share prices have been relatively flat during after-hours trading, confidence in Chief Executive James Hackett’s restructuring plan has been muted since his promotion in May 2017, with shares down almost 25%. Many investors felt his plan was taking too long to implement as he reassured investors they “won’t have to wait long” for more details on a recent earnings call.
Ford has struggled through 2018 primarily due to outside factors beyond its control; economic slowdown in Europe and China is something many foresaw, but few have been able to respond to effectively.
With sales down in Asia, a key growth region, the company has more work to do to convince its shareholders that the restructuring plan is worth the wait.
To learn more about other MarketLine and GlobalData analysis, read about Global New Cars: https://store.marketline.com/report/ohmf4069–global-new-cars/
