Ford reported third quarter earnings on Tuesday. Tax accounting pulled the car maker’s profit down slightly, but on balance earnings were in the general ballpark of what analysts expected.
In an interview after the numbers were released, CFO Bob Shanks expressed plenty of satisfaction about Ford’s results in the quarter and the year to date.
But he acknowledged that North America was pulling the train in terms of Ford’s overall business. The automaker generated a $US2.2-billion pre-tax profit — North America contributed $US2.7 billion, while other regions were down or flat.
Shanks added that Ford Credit had its best quarter since 2011, that outside the US, operations improved year-over year, and that cash flow at $US2.8 billion was a big boost of $US3.5 billion over the third quarter in 2014.
“Boom, boom, boom, boom,” Shanks enthused.
Ford’s most important vehicle, the F-150 pickup truck — for decades the bestselling vehicle in the the US — is having its expected impact on Ford’s bottom line, after a redesign to use more lightweight aluminium in the truck’s construction led to some supply constraints.
“F-150 is now at full availability,” he said. “It’s contributing to the business in a positive way.”
In fact, re-engineering the F-150 to shed weight has, according to Shanks, enabled Ford to have flexibility with other products in its portfolio. The risk that Ford took with the pickup has better positioned the company to meet government fuel-economy requirements. And although there were some issues with the F-150 launch, that risk appears to be paying off.
Shanks also noted that Lincoln, a brand that was in trouble before Ford committed to significantly revamping it several years ago, is turning into a bright spot. Ford reported a sales increase of 15% over Q3 2014, the best uptick since 2008 for the luxury brand.
Lincoln has several SUVs and crossovers in the lineup. These types of vehicles are ruling the US market at the moment and are rapidly catching on in China.
“It’s going to be a long journey,” Shanks said of Lincoln. “But the products are resonating well with consumers, and it’s doing well in China.”
He said that Ford’s business in China should finish the year strongly, even as the country endures a weakening economy. According the company, China market share didn’t change in the third quarter, and Shanks highlighted several new product launches.
“We’ve built strong position in China and have further opportunities,” Shanks said.
Ford had lagged competitors, such as General Motors and Volkswagen, in China, but has caught up rapidly. It holds roughly 5% market share and has announced plans to built new factories and roll out over a dozen new vehicles there. The contrast is stark between the robust US market and the rest of the world, with Europe and Latin American presenting ongoing challenges and China slowing down.
But thanks to the US recovery and the anticipated performance of the F-150, along with other trucks and SUVs that Ford sells, Shanks said that Ford would raise its guidance to the higher end of its predicted 8.5-9.5% range for operating margin.
He also said that Ford expects the fourth quarter to close with the US having achieved a sales paces of 17.7 million in new vehicle sales, about a million vehicles better than the 2014 total.
But Shanks also pointed out that Ford is enjoying solid US performance at a time with the auto industry is experiencing a major transformation, as new players like Tesla enter the fray and established car makers bring more technologies into their vehicles while pursuing alternatives methods of propulsion, including hybrids, electrification, and fuel cells.
“Change is the most exciting thing that’s happened in the business,” Shanks said.
At a time like this, he said, “it’s very special to work for an iconic American car maker like Ford.”