DETROIT — Ford Motor Co. lost almost $1.7 billion ($2.25 billion Canadian) in the fourth quarter after taking a big accounting hit from employee pension liabilities and retirement benefits, but the automaker eked out a modest profit for the year.
Ford on Tuesday said its fourth-quarter earnings before interest and taxes in the quarter plummeted 67 per cent to $485 million, while automotive EBIT dropped 81 per cent to $215 million. Ford's North American earnings fell 64 per cent to $700 million, mostly due to UAW contract costs, warranty expenses and problems with the launch of the redesigned Explorer and Aviator crossovers.
Ford CEO Jim Hackett, in a call with investors Tuesday evening, admitted the company’s execution was “simply not nearly good enough,” but stressed patience with its restructuring plan and argued that fundamental changes to its product lineup and business units would eventually yield positive results.
Ford shares tumbled more than 9 per cent to $8.30 in after-hours trading after it announced results.
The automaker last month warned that its fourth-quarter results would include a $2.2 billion charge related to its pension plans. The company has now reported two consecutive fourth quarter losses, after losing $116 million in the final period of 2018.
Revenue in the fourth quarter fell 5 per cent to $39.7 billion.
For the full year, Ford posted net income of $47 million, down from $3.7 billion in 2018. Ford Credit posted full-year earnings before taxes of $3 billion, its best results in nine years.
"2019 financially was not OK," CFO Tim Stone said. "From a strategic perspective, I think we had strong progress executing our strategic vision. As I look to 2020 and beyond, I'm very optimistic."
For 2020, Ford said it expects adjusted free cash flow of $2.4 billion to $3.4 billion and adjusted EBIT of $5.6 billion to $6.6 billion.
Ford’s issues in North America – which consistently provides the bulk of its profits – included $600 million in charges related to the recently-ratified UAW contracts. It also included manufacturing problems with the Explorer and Aviator, which Ford says have been ironed out.
The automaker was also hurt in the quarter by higher-than-expected warranty costs. Ford in August said it would extend the warranty on certain 2014-16 model year Focus and Fiesta sedans with problematic dual-clutch transmissions by two years and 40,000 miles.
Full-year North America EBIT fell 13 percent to $6.6 billion, meaning Ford’s UAW workforce will receive profit-sharing checks of $6,600 on average later this year.
The automaker lost $300 million in its mobility business in the fourth quarter, greater than the $200 million it lost in the fourth quarter of 2018, due to greater investments in autonomous vehicle technology.
Despite the fourth-quarter declines, there were some regional bright spots.
Ford in Europe made $21 million in the quarter, compared to a $199 million loss the same period a year ago, as it restructures its operations in the region. The company is closing six manufacturing plants and eliminating 12,000 jobs in Europe.
The automaker’s $207 million fourth-quarter loss in China was 61 percent smaller than the same period a year ago.
Hackett said it was “simply too early” to say what the financial impact of the coronavirus will be on Ford’s 2020 earnings. He said Ford hopes to resume a large part of operations in China next week.
“Our Ford team is proactively monitoring the situation on several fronts,” he said.