Ford Motor Co., the 114-year-old automaker that put the world on wheels, is turning away from its original mission of selling sedans to the masses.
The company responsible for launching the modern carmaking era with Henry Ford’s assembly line will pivot away from being a full-line automaker, shrinking its passenger-car lineup and shifting only to low-volume, high-margin models.
The reason? Years of coming up short on a long-held profit-margin target. Earnings disappointments cost former Chief Executive Officer Mark Fields his job in May, and his replacement Jim Hackett has since laid out plans to reorient the company around lucrative sport utility vehicles and pickups, plus play catch-up on the trends that are sweeping the auto industry: the rise of electric, autonomous, connected and shared vehicles.
“Let’s be clear: We are not satisfied with our performance,” Chief Financial Officer Bob Shanks told analysts Tuesday. “For the past seven months, we have undergone a rigorous assessment to ensure we are fit as a business and are making the choices that will create the Ford of tomorrow.”
Ford shares plunged as much as 6.3 percent, the steepest intraday drop since July 2016, and traded down 5.8 percent as of 10:10 a.m. in New York. The stock rose just 3 percent in 2017, trailing Tesla Inc.’s 46 percent surge and General Motors Co.’s 18 percent jump.
Before delivering a presentation at the Deutsche Bank Auto Industry Conference, Shanks warned that adjusted profit will fall this year to $1.45 to $1.70 a share, down from about $1.78 last year. While Wall Street had been expecting a drop from 2017, the low end of the company’s guidance is worse than what analysts were anticipating.
“It appears that nothing is sacred at Ford,” Joe Spak, an analyst at RBC Capital Markets, wrote Wednesday in a report to clients.
Margin Mishaps
Ford’s automotive business earned just a 5 percent profit margin last year, less than its average since 2010 of about 6 percent, according to Shanks. The company hasn’t achieved its 8 percent goal in any year since the global recession, he said.
The automaker flagged its expectation for weaker earnings two days after Executive Chairman Bill Ford said the company founded by his grandfather is going “all in” on electric cars. Ford kicked off this week’s Detroit auto show by pledging to invest $11 billion to bring 40 electrified vehicles to market by 2022.