Ford Motor Co. reported a lower quarterly net profit on Thursday but beat analyst expectations amid higher commodity, engineering and recall costs, and a drop in vehicle sales.
Ford shares were down slightly at $11.54 in early trade.
The No. 2 U.S. automaker, which reiterated its pretax profit forecast for 2017, warned investors in late March that higher costs and lower sales volumes would hurt quarterly earnings.
Chief Financial Officer Bob Shanks told reporters at the company’s headquarters in Dearborn, Michigan, that additional costs made this the “toughest quarter” for 2017.
Shanks said Ford’s results for the rest of the year would be “about flat to a little bit better” compared with 2016.
The company’s results come at a time of uncertainty for the U.S. auto industry following disappointing sales in March.
While sales of new vehicles have risen since the end of the Great Recession and hit 17.55 million units in 2016, analysts expect a slight sales decline in 2017. Ford said Thursday it expects industrywide sales to decrease a little this year and in 2018.
Ratings agencies have warned of worsening credit and there are concerns millions of nearly new leased vehicles due to flood the market over the next couple of years will depress used-car values and hurt U.S. automakers’ sales.
Shanks said Ford’s own used-car values at its finance arm were down 7 percent compared to the same quarter in 2016, but said customers’ credit scores remained high and we “feel really good about where credit is.”
“Clearly we’re moving to a different stage of the cycle, but we think based on what we know that we’ve got it covered,” he said.
Ford’s costs during the first quarter were hurt by two recalls in North America, one to replace potentially faulty side door latches and the other for under-hood fire risks. The company said it expects to spend $295 million to fix those problems.
Ford expects commodity costs to be around $1 billion higher this year. Shanks said around half of that will be due to higher steel prices.
Ford maintained its expectation for a full-year 2017 pretax profit of around $9 billion, down from a record of $10.4 billion in 2016.
The company reported a first-quarter net profit of $1.6 billion, or 40 cents a share, down 36% from $2.5 billion, or 61 cents per share, a year earlier. Analysts had, on average, expected earnings per share for the quarter of 35 cents.
Automotive revenue rose to $36.5 billion from $35.3 billion a year earlier. Analysts had expected $34.7 billion.
