Boston, MA 12/19/2013 (wallstreetpr) – Ford Motor Company (NYSE:F)’s shares dipped by 6.29% on Wednesday following the weak guidance issued by the company for 2014. The company expects lower pretax profits in 2014.
New product launches to lead to higher spending
The automaker expects that pretax profits in 2014 will be hurt by the weak economic conditions in Europe and South America. Ford Motor Company (NYSE:F) expects to post pretax profits of $8.5 billon fir fiscal 2013 but expects this to slip to $7-8 billion in 2014. This year’s earnings will be driven by strong North American performance. The performance is expected next year also but earnings will be impacted on account of new launches. Ford has planned 16 new launches in North America in 2014 almost three times the launches in 2013. This would result in lower prices for the older models as these get phased out. The second impact would be on costs as spending is increased on account of these lauches.
Lower profit on weak European outlook
European Union has seen a severe downturn with car sales at historic low, in fact such bad car sales were last seen decades ago. Macroeconomic conditions in South America, particularly in Venezuela will also impact profits. Weaker Yen is also driving exports from Japan; this has lead to a fall in small cars and sports utility vehicles. Japanese carmakers are able to reduce prices to compete directly with the American automakers.
Ford Motor Company (NYSE:F) will benefit from the new product launches from 2015 onwards as the demand for new models drop and spending on new launches decreases. “The pay-off for North America from the 2014 launches and investments we incur for future periods will be a stronger product line-up and volume and revenue opportunities into 2015 and beyond,” Bob Shanks, Ford executive vice president and chief financial officer said. Ford is already accelerating restructuring in an effort to control costs.
