DETROIT (AP) - Ford Motor Co. said Wednesday it is in the midst of a major restructuring of the company that will cost $7 billion in cash and hit pretax earnings by $11 billion over the next three to five years.
But the company, which also reported a 48 percent second-quarter net profit decline, gave few details on what exactly will be cut or changed, bringing criticism and frustration from Wall Street analysts.
The company canceled its annual presentation for investors scheduled for September because the restructuring is still in progress, but said it would give updates on quarterly earnings calls and in other ways.
The lack of specifics brought criticism from Morgan Stanley analyst Adam Jonas, who encouraged CEO Jim Hackett to communicate more details.
“You’re kind of almost teasing the market with these very large numbers,” Jonas said, telling the company to present the plans “in a narrative that can be understood.”
Jonas even asked if Hackett would still be CEO by the time the investor meeting is rescheduled. Hackett replied that he’s proud of the management team and the progress Ford has made, and that he will be in charge on that date.
Chief Financial Officer Bob Shanks said such a major redesign of the company will take time with many parties involved, and pledged to share actions as they’re completed. He noted that Ford is looking to allocate capital spending to high-performing areas and away from low-performing ones.
Ford blamed slumping China sales and a fire at a U.S. parts factory that cut production of lucrative pickup trucks for the profit decline from April through June. The company still made $1.1 billion, or 27 cents per share. But that fell short of analysts’ expectations of 31 cents, according to FactSet. China sales slumped due to aging products, and the company’s joint venture lost $483 million.
The fire knocked out production of highly profitable F-Series pickup trucks for a little over a week in May. Ford said at the time it had enough inventory so that sales wouldn’t take a big hit.
Troubles in China as well as Europe caused the company to cut its full-year guidance to $1.30 to $1.50 per share. It had been $1.45 to $1.70.
Revenue was $38.92 billion, also short of expectations. Analysts expected $39.14 billion.
Ford shares fell 3.7 percent to $10.13 in after-hours trading.
The company said it’s taking “urgent action” in China to fix the business, including cost cuts, building more vehicles in China and recruiting more local talent for top positions. Ford says it’s also rolling out revamped vehicles with 60 percent of its lineup being refreshed or new by the end of next year.
Ford warned in May that the fire at Meridian Magnesium Products in Michigan would have a short-term impact on earnings. The plant makes front-end parts for Ford pickups and big SUVs. The ensuing parts shortage forced Ford to lay off about 7,600 workers at two truck factories for about a week. But the company went to great lengths to resume production SUVs, even flying equipment from the U.S. to a Meridian factory in Europe.
Ford’s sales dropped in the U.S. by 0.8 percent during the quarter as sedan sales slumped. Although it sold 236,000 F-Series pickups during the quarter and is on a record sales pace, the company’s North American pretax profit of $1.8 billion was $600 million less than a year earlier.
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This story has been corrected to show that Ford’s China joint venture lost $483 million in the quarter, not that it was about break even.
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