CFO Bob Shanks: “We expect Ford’s performance to be strong through 2018 — with our core business improving, allowing us to invest in the emerging opportunities that will ensure our future success.”
DETROIT — Ford Motor Co. today said it expects profits to decline next year before rebounding in 2018 as it increases investments in new business models but targets cost savings of $3 billion annually in its core operations.
The company said it projects positive cash flow through at least 2018 and asserted that Ford stock is a “strong investment with attractive upside.” Ford said it is targeting operating margins of at least 8 percent for its core business and 20 percent for the mobility services and other “emerging businesses” it is getting involved in.
“We expect Ford’s performance to be strong through 2018 — with our core business improving, allowing us to invest in the emerging opportunities that will ensure our future success,” Ford CFO Bob Shanks said in a statement released ahead of a daylong gathering of investors and analysts at its headquarters. “Our capital allocation continues to be disciplined and to deliver strong returns, and we are fully prepared for a downturn. 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.”
Ford outlined three ways it plans to improve its business: increasing sales of its lucrative trucks and utility vehicles, making small and luxury vehicles more profitable, and investing in electrification, autonomy and mobility.
It said adjusted pretax profits for its core business would improve every year from 2016 through 2018 but that total earnings would decline next year due to higher investments and costs related to emerging opportunities. The company expects an adjusted pretax profit of $10.2 billion this year, 5.6 percent less than the $10.8 billion it earned in 2015.
It reduced its outlook for 2016 last week after expanding a regional recall of faulty door latches to cover vehicles nationwide at the request of federal regulators. The recall, now covering more than 2.3 million vehicles, is expected to cut third-quarter profits by $640 million, Ford said.
“During the past six months, we’ve been focused as a leadership team on building Ford’s expanded business model — with a more clearly defined vision, strategy and roadmap on how to deliver success,” CEO Mark Fields said in a statement. “We’ve been making important decisions and have agreed on three key principles to guide future capital allocation: where to play, where not to play and how to win.”