These Two Factors Affected Ford’s 4Q Performance in North America



Ford’s revenues in 4Q17

In 4Q17, Ford Motor Company’s (F) global revenues stood at $38.5 billion, a handsome increase of about 7% from its $36.0 billion in revenues in the same quarter of 2016. These revenues were from the company’s automotive segment excluding its credit division’s revenues. Ford’s 4Q17 automotive revenues were also much higher than analysts’ revenue estimates of $37 billion. These gains were primarily driven by a 2% YoY rise in the company’s global wholesale volume to 1.7 million units.

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Performance in North America

From North America, Ford reported revenues of $24.1 billion in the fourth quarter last year, an increase of ~4% from $23.1 billion in 4Q16. In contrast, the company’s pre-tax profits from the region fell to $1.6 billion, down 16% YoY. In addition, Ford’s operating profit margins from the region contracted significantly to 6.8% in the fourth quarter this year from 8.5% a year ago.

Key factors

The company’s revenues from the region went up primarily due to a 5% rise in its wholesale volume in North America. However, unfavorable net pricing and higher contribution and structural costs hurt Ford’s profits from North America.

Overall, Ford cited higher commodity and warranty-related costs as the two key negative factors that hurt its profits from North America. On the brighter side, higher demand for Ford’s F-series trucks acted as tailwinds to its profitability in the fourth quarter. Heavier vehicles such as pickup trucks typically yield higher profits than small cars. Also, according to Ford’s internal estimates for 4Q17, its North America market share slightly rose to 13.7% from 13.1% a year ago.

Other legacy automakers (IYK) such as General Motors (GM), Fiat Chrysler (FCAU), and Toyota (TM) compete with Ford in the US truck segment. GM’s Chevrolet Silverado, FCAU’s Ram, and Toyota’s Tundra pickup trucks are popular in the US market.

Continue to the next part to learn how Ford performed in Europe in 4Q17.


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