The reason Ford stock is plunging this morning is not so much the company’s earnings miss, when the US auto giant reported Q2 EPS of $0.52, below the $0.60 expected, but because in some startling language, CEO Mark Fields laid out a very gloomy picture of the future.
As the company reported in its press release, it told investors to “expect another strong year of results, and Ford committed to full year guidance of company pretax profit and operating margin equal to or better than last year;however, company now sees risks challenging achieving guidance. Entire Ford team working to mitigate the risks.”
A key part of the problem is one shown here repeatedly over the past year, namely the troubling increase in auto inventories, which are now at 5 year highs, and the inventory to sales ratio back to levels seen during the last recession.
Whether the pile up of autos at dealers is the main threat to future sales, is not certain, as the company was relative vague about the risks facing it. What it was not vague at all, about, however, is that the company which until recently was the stalwart of the only US manufacturing sector to be humming along while the rest of US non-service industries tumbled, is that the future is suddenly very unclear and full of risks.
To wit:
“We’re committed to meeting our guidance, but it is at risk,” Chief Financial Officer Bob Shanks told reporters Thursday. The company now says it’s unlikely that U.S. vehicle sales will break last year’s record, and Shanks predicted further contraction in 2017. “We don’t see growth, at least in the near term.”
“We do think the U.S. is coming down from what we expected,” Shanks said. “We saw higher U.S. incentives – that was for the industry and for us. The industry increased and we increased in line with the industry.”
“We are working, as we did in the first half, to deliver profit improvement actions,” Shanks said. “We do have risks. We’ve seen those risks. We’ve addressed those risks in the first half. We need to continue to do that in the second half and deliver the guidance that we’re committed to do.”
“What we’re seeing is that over time, particularly as the U.S. industry has started to plateau, we’ve seen a very gradual, modestly rising incentive level,” Shanks said later in a conference call with analysts.
Ford lowered its estimates for full-year industry sales in the U.S. saying second half sales will be “much weaker than normal” and said next year’s sales will be even weaker.
And while we know that there is a massive inventory build up, the question is why. One reason was presented here this Monday when we reported that “Subprime Snaps: Largest US Subprime Auto Lender Delays Earnings Due To “Accounting Matters.” And while we await Santander Commercial to file its delayed, and adjusted, earnings report, it appears that even without the hard data one can conclude that the subprime driven auto-boom, which propelled the auto industry over the past two years, has finally ended.
For confirmation look no further than Ford stock, which this morning is tumbling by 10% as the market is suddenly repricing risk in the US auto industry.
And new housing starts are at 1963 levels.
It should plunge. That 6.0L , and 6.4 Navistar engine is GARBAGE!!!! For those of us who were FOOLISH enough to buy a Ford SuperDuty with a these engines have been hit with expensive repair bills after blown head gaskets, warped heads, broken crankshafts, con-rods and pistons after the cascading (DUMB DESIGN) oil cooler/EGR cooler failures causing all that damage. Those thrice damned “Torque to Yeald” head bolts failure. The “FIX” runs from $5000 to $7500. Lot of that is labor, but it also involve a redesigned EGR cooler, Oil to air cooler installation, and an updated Hight Pressure Oil pump and all the improved plumbing to go with it. Also new ARP head studs and a decent head gaskets. That is asuming you understood the problem before you liquid locked your engine with coolant from eeither a blown head gasket or cracked EGR cooler.
Ford dropped the Navistar engines, and sued them also. They built their own diesel called the 6.7L power stroke, but have more problems with the ceramic turbocharger center bearings turning to dust. The exhaust system alone on that $74,000 dollar truck is over $9000 from what I’ve been told. Thats CRAZY!!!!
I’ve baught my first and LAST Ford product with the truck I have and NEVER will buy another. If you drive one of these trucks you need a BG service on the cooling system and Oil system to try and keep the EGR cooler and oil to coolant cooler from clogging. Intervals for this service should be every year in my opinion if you drive the truck every business day.
Doors rattled since the truck was new. Dealer never would fix it under warranted. Front axles are week and bend easily, already replaced both front shafts and seals, as well as the power steering gearbox.
So if you want to buy a FIX OR REPAIR DAILY then prepare to be soaked with repair costs and unreliability.
Buy a DODGE or Chevy. Friends and family have both and have had very minor problems compared to the Ford we have.
Ford. Quality is NOT Job – 1