Ford profits driven down by warranty costs in North America

Chief executive Alan Mulally says he will remain with company through year end

Mark Fields, chief operating officer  at  Ford Motors. It has been reported that  Ford  will  soon name  Mr Fields as successor to chief executive Alan Mulally.  Photograph: Steve Marcus/Reuters

Mark Fields, chief operating officer at Ford Motors. It has been reported that Ford will soon name Mr Fields as successor to chief executive Alan Mulally. Photograph: Steve Marcus/Reuters

Sat, Apr 26, 2014, 01:02

Ford Motors has posted a lower-than-expected first-quarter profit as the US car maker saw $400 million in higher warranty costs in North America, sending shares down 3.4 per cent. The company also saw incentives in North America rise in the quarter due to heavy competition and an ageing line-up of vehicles, which it will address with the launch of 16 new models in the region this year.

Ford chief executive Alan Mulally (68) told analysts on a conference call that there was no change to plans for him to remain at the company through the end of the year. Earlier this week, a source said that Ford would soon name chief operating officer Mark Fields as Mr Mulally’s successor.

While Ford adjusts its warranty reserves every quarter, chief financial officer Bob Shanks said the total was larger in the first quarter because the company had seen more field service actions, such as safety recalls and addressing customer complaints, over the last two years. He said that was a trend in the industry as vehicles became more complex.

The company affirmed its forecast for pretax profit for 2014, a year in which it is launching a record 23 new vehicles globally. It also said it was amending and extending its revolving credit facility. Mr Shanks said the underlying business remained strong.

Net income fell 39 per cent to $989 million, or 24 cents a share, from $1.61 billion, or 40 cents a share, in the year-earlier period.

The company’s loss in Europe, which has been a drag on Ford profit for several years, was $194 million, down from $425 million a year ago. – (Reuters)