Ford's disappointing performance for its fourth quarter has managed to wipe out its profits for the entire year. The company mentioned in its latest earnings report that it will need to do better in the coming quarters to make up for its losses last year.
The company's CEO, Jim Hackett, stated in its fourth-quarter earnings statement that the performance for 2019 fell short of their expectations. Hackett reassured stakeholders that have taken accountability for the company's poor performance and are taking steps to remedy the situation to prevent it from happening again this year. Following the release of its fourth-quarter results, Ford's share prices tumbled by 7 percent in after-hours trading.
Ford warned investors that the company's turnaround will not be immediate as it still has to rectify some aspects of the business to ensure profits for 2020. The first quarter is expected to not be a particularly good month for the company as it predicts that its earnings before interest and taxes would likely be lower than $1.1 billion when compared to the same period last year.
According to executives, the drop in the first few months of this year will mostly be caused by the continuation of higher warrants costs, reduced results from its other businesses, and lower vehicle sales volume globally. Ford also stated that it expects higher investments in the coming months as it slowly transitions to newer technologies such as autonomous driving and electric vehicles.
For its fourth quarter, Ford reported a loss of $1.7 billion. The majority of the loss was due to its previously disclosed $2.2 billion in expenses related to pensions and benefits for its retired employees. The company's operating income was also marginally lower and was unable to keep up with the added expenses.
The massive hit in the fourth quarter managed to erase the company's profits in the previous quarter, netting the company a full-year profit of only $84 million. This was a dramatic drop from the $3.7 billion in profit the company made in 2018. The company's profits in 2018 were also drastically lower than its $7.8 billion net income in 2017.
Ford attributes the declining profits to its continued restructuring strategy, which it estimates will cost a total of $11 billion. The restructuring plan includes the reshaping of the company's portfolio, essentially shelving less profitable units both domestically and overseas.
Hackett claims that significant progress has been made in its restructuring and new technology adoption strategy. He added that over the past year, Ford has slowly set itself up to become more competitive, especially in the emerging era of smart vehicles.
