US economy

Ford hourly workers will get $7,600 profit-sharing checks


Ford Motor Co. said Wednesday afternoon that its U.S. production workers will receive $7,600 in profit-sharing checks based on 2018 earnings, which dipped slightly from 2017. 

Ford said the cost of recalls, tariffs, commodity prices and lower sales in Asia weighed on its finances last year.

Ford posted 2018 earnings before interest or taxes — EBIT — of $7 billion, down from $9.6 billion in 2017. The company said $7.6 billion of that was in North America, which will result in the $7,600 profit-sharing checks on average for a majority of the company’s 56,000 hourly United Auto Workers-represented employees.

Net income, or profit after taxes and other charges, was $3.7 billion, down from $7.7 billion in 2017.

Profit sharing was $7,500 last year. 

Ford said it changed its reporting in 2018 to establish a mobility business unit, separate from the North American unit that drives the profit-sharing formula. That’s why profit sharing grew despite overall profits being down. Ford awards its UAW employees $1,000 in profit sharing for every $1 billion in North American profit before taxes.

Not all hourly workers are eligible for the benefit. Those who do get profit-sharing checks in the spring.

Ford blamed company challenges in Europe and particularly China for the drop in pretax earnings from 2017. The company saw full-year revenue of $160 billion in 2018, up 2 percent from 2017, generated primarily by sales in North America.

“While 2018 was a challenging year, we put in place key building blocks to build a more resilient and competitive business model that can thrive no matter the economic environment,” Chief Financial Officer Bob Shanks said in prepared remarks during a media briefing at company offices in Dearborn, Michigan. “We are confident in our plan to transform our business.”

He noted that Ford has $23.1 billion cash on hand.

Industry analysts monitor EBIT to assess management effectiveness.

Edmunds noted that Ford vehicle sales declined for a fourth straight quarter, with October-December 2018 marking the most significant decline of the year at 6.8 percent. Market share also declined at the end of the year by 7.7 percent.

Ford leaned heavily on incentive spending in order to move its aging products off dealer lots, Edmunds noted. Ford’s average incentive spending reached $5,425 from October-December 2018, a 10.2 percent spike from a year earlier.

The company saw profits generated by its F-Series pickups in the U.S., Canada and Mexico, based on a strong product mix with high profit margins.

However, the company did take a $674 million charge with planned investments in mobility services and driverless vehicle technologies “as expected,” Shanks said.

Ford reported a net loss of $116 million in the fourth quarter, a decrease of $2.6 billion, due primarily to asset returns on pension investments.

Ford said North America continued to generate most of its profit in the fourth quarter, posting earnings before taxes of nearly $2 billion, up 11 percent compared with the same period last year.

Shanks said Ford has taken a hit of about $770 million from tariffs and costs related to steel and aluminum price hikes, plus an additional $1 billion in commodity charges and currency exchange and about $760 million related to Takata airbag recalls and repairs. 

“It was not a year we were happy with,” Shanks said. “Looking back on the year, we suffered all of the headwinds … but North America actually advanced. It is the foundation of the business.”

Stock analysts have consistently expressed caution about Ford stock.

In 2018, Ford stock, which has been in decline since June 2014, saw a 52-week high of $12.15 and a 52-week low of $7.41.

Adam Jonas, an analyst at Morgan Stanley, wrote to investors in January 2019, “Significant questions remain about the near term and long term direction of Ford’s fundamentals and strategy. We believe investors must exercise extreme levels of patience with this story as it unfolds.”

Follow Detroit Free Press reporter Phoebe Wall Howard on Twitter @phoebesaid

 



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