Yahoo Finance Ford results highlight pressure on profit margins
By Bernie Woodall
(Reuters) - Ford Motor Co (F.N) has two big challenges in 2015 - narrowing its loss in Europe where it trails key rivals, and rebuilding North American margins which drive overall profits.
Ford reported fourth-quarter results Thursday and lowered its 2015 forecast for Europe, saying it will not lose as much as the $1 billion (664 million pounds) it lost last year.
Just four months ago, Ford told investors it would lose $250 million in Europe in 2015. It lost money in the region last year despite boosting revenue by $2.2 billion and selling more cars than the previous year. Ford lost $121 million in Russia in the fourth quarter.
Ford's troubles in Europe stand out because rivals General Motors Co (GM.N) and Fiat Chrysler Automobiles (FCAU.N) (FCHA.MI) are gaining traction in a market that has been down since the global recession.
FCA this week posted its first quarterly profit in Europe since 2007, in part because it has no major investments in the stumbling Russian market. GM affirmed its forecast for a profitable European auto business next year.
"Obviously, the situation in Russia is going to continue to impact us and will be a drag on our earnings for a period of time," Ford Chief Executive Mark Fields said Thursday.
FCA CEO Sergio Marchionne said Wednesday he expects a profitable year for its European operations. He steered clear of big investments in Russia earlier in this decade when rivals were jumping in.
"Europe remains a big question mark that's going to overhang both Ford and GM for the foreseeable future," John Brager, senior credit analyst with Hermes Investment Management, said in London on Thursday.
In North America, Ford's 2014 profit margins fell to 8.4 percent from 10.2 percent the previous year. In the fourth quarter, North American margins were 7.4 percent, down from 8.2 percent a year before, in large part because of an expensive remaking and launch of an aluminium body F-150 pickup truck, company executives said.
The F-series truck line drives Ford's performance in North America, the region that in 2014 contributed $6.9 billion in pretax profit, more than the company's total pretax profit after losses elsewhere.
Ford told investors last fall that North American margins this year would range from 8 to 9 percent, down from more than 9 percent on average from 2010 to 2013. Ford executives warned that consumers may not pay the full costs of technology to cut greenhouse gas emissions because gasoline is cheap.
Gasoline prices have fallen sharply since then.
Ford's North American auto margins could be at the low end of the forecast range early this year, Chief Financial Officer Bob Shanks said. "We might have the opportunity to operate at the higher end of that range, but I think it's too early to say."
Crosstown rival GM is sticking to a promise to deliver 10 percent profit margins in North America by 2016 while reaching total profit margins of 9 to 10 percent by early next decade.
Morgan Stanley analyst Adam Jonas said Ford and its rivals will be challenged by the impact of the strong dollar and tough competition in the U.S. pickup market.
"We believe any achievement within the company's pretax guidance would be highly respectable and even impressive," Jonas wrote.
(Reporting by Bernie Woodall; editing By Joe White and Richard Chang)
