Ford continued its march into the realm of profitability when it posted a $2.6 billion profit for the first quarter this year, but the automaker warned even then that it expected slightly lower profits for the rest of the year.
As the second quarter financials begin to come in, Ford reiterated its expectation to see a slight dip in its quarterly profits compared to Q1 for the rest of 2011, citing rising raw material costs as a major factor, according to The Detroit Free Press.
While the Blue Oval is suggesting profits won’t be as handsome as $2.6 billion, the drop is expected to be minor, according to Bob Shanks, Ford controller, who spoke at a Deutsche Bank conference, “The second quarter (profit) could actually be very close to the first quarter ($2.6B). The second half is usually a bit weaker than the first half.”
Shanks’ comments only mirrored what Ford CEO and president Alan Mulally said back in April when he warned that commodity and structural costs were expected to be on the rise for the rest of the year, which would in turn have a negative impact on profitability. As of now, Shanks estimates an additional $2 billion in commodity and structural costs will be incurred due to rising costs, as previously projected.
Adam Jonas, an automotive analyst with Morgan Stanley spoke on the matter and shared a bit of disappointment in the projections, stating that the expected profits are a bit lower than anticipated. Jonas also went on to explain that another factor playing a role in Ford’s profits is the shift towards more car sales, rather than highly profitable trucks. As a result, Ford is losing out on as much as $5,000 of profit for each car sold instead of a truck.
Despite rising costs, Ford committed to raising capital improvements from the 2010 level of $3.9 billion to $6 billion per year through 2015 as the automaker makes the necessary changes and upgrades to boost sales by a projected 50 percent by mid-decade.
References
1.’Ford expects lower…’ view
