Ford Posts 35% Drop in Profit for First Quarter

Profit at Ford was down by 35% during its 2017 first quarter to just over $1.6 billion as the higher costs of recalls, materials and warranties ate into its earnings.

The automaker, based in Dearborn, Michigan, also was faced with a difficult comparison for the first quarter of last year and has come face to face with dropping sales in the industry in the U.S.

In 2016, the profit for the automaker was $2.4 billion, the highest profit for a quarter by the company on record.

Earnings per share for Ford were 39 cents in comparison to 36 cents that Wall Street was expecting.

Ford Chief Executive Bon Shanks said the performance of the company was higher than had been earlier forecasted because North America as well as two other regions had sales slightly higher than had been expected.

The automaker already had warned its investors that its profit for the first quarter would drop by over 50% to between 30 cents and 35 cents a share.

Shanks said that costs were up $1.2 billion during the three months in comparison with the same three months one year ago.

Higher costs had been created by an increase of $467 million in warranty costs, an increase of $176 million in costs of commodities and an increase of $253 million in costs to launch new products.

The higher costs for warranties included costs of $300 million for a pair of recalls.

Despite rough first quarter results Ford did say it expects a profit before taxes of $9 billion during 2017. That would be approximately $1.4 billion less than its results from 2016.

Shanks said it is not expected that the higher costs would continue during the upcoming three quarters.

Ford, as well as all automakers, is facing an automotive industry in the U.S. where sales have started to stall following seven years of growth that set new record highs for sales.

Now, incentives in the industry have increased as carmakers work to put on the brakes on their production and lower their inventory.

Revenue for the first quarter at Ford was up to just over $39 billion in comparison to $37.7 billion during the same period one year ago.

North America produced the most profits for the automaker even though profits fell in the region to $2 billion in comparison to $3.1 billion the prior year.

In South America, hit by problems in Venezuela and Brazil, Ford posted a loss of $224 million prior to taxes. In Europe, in a recovering market profit before taxes was $176 million and in Asia $124 million.

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