These are challenging times for Ford, and all eyes are trained on CEO Jim Hackett as the company reports its third-quarter earnings Wednesday.
Hackett faces impatient investors and industry analysts who have grown frustrated in recent months by the company's weak performance and his lack of details on the automaker's $11 billion restructuring plans. The second-largest U.S. automaker has been struggling with rising commodities costs, tough competition and fallout from the Trump administration's trade war. Its shares have lost almost a third of their value this year, closing at $8.41 a share Monday.
Hackett embarked on an ambitious restructuring plan and boldly decided earlier this year to phase out all of Ford's sedans, except for the iconic Mustang. He's been slashing costs and trying to refocus most of its production on its best-selling SUVs, trucks and other profitable ventures. But those changes have yet to filter down to Ford's bottom line.
Morgan Stanley downgraded Ford last week, saying its earnings and cash flow are under pressure and its dividend is at risk. Morgan Stanley analyst Adam Jonas also said investors need "more evidence of success before embracing the Ford restructuring story."
The company lowered its 2018 earnings projections after second-quarter profits plunged by almost 50 percent to $1.07 billion. Production of its popular Ford pickup truck was disrupted following a fire at one of its suppliers in May, and the company sustained heavy losses in China during the quarter. Chief Financial Officer Bob Shanks also said at the time that U.S. tariffs on steel and aluminum were expected to eat up about $600 million in profit this year.
Analysts surveyed by Refinitiv are expecting Ford to report a 35 percent slide in third-quarter earnings from the same period last year, to 28 cents a share. Revenues are forecast to fall 1 percent to $33.3 billion.
The Detroit automaker told investors during the last quarter that restructuring expenses, designed to focus the company on its more profitable businesses, could cost up to $11 billion over the next three to five years, but executives have been scant on details of how that money will be spent.
Jon Gabrielsen, an independent consultant who studies the automotive industry, said Ford has been struggling outside of North America, where its truck and SUV sales have helped bolster revenue.
South America is an especially sore spot for all three Detroit automakers, Gabrielsen said. "They are all losing share, and they are all bleeding," he said.
Ford's earnings are also likely to show weakness in Europe, and numbers suggest sales in China are declining, he said.
"Either they know it and they have to put on a brave face, or they are truly in denial," he said. "I have always revered Ford's foresight, to see things coming and take the right actions, and their financial conservatism, and I am absolutely baffled how they took their eye off the ball over the last five-10 years."
While all eyes will be on Hackett, Gabrielsen said the CEO hasn't been on the job long enough to shoulder all the blame. Hackett took the helm at the 115-year-old manufacturer only about 1½ years ago, but some investors have grown impatient at the lack of detail and slow pace at which he's making changes.
The company said early this month that it will thin the ranks of its 70,000-person salaried workforce by the second quarter of 2019 as part of the restructuring but provided few details.
"While we see scope for potentially tens of thousands of headcount reductions at Ford, we are increasingly concerned that the capital markets do not have confidence in Ford to take decisive action fast enough," Morgan Stanley's Jonas said. "Part of the problem is that management has chosen not to provide a road map of how the $11 [billion] can be spent."
Ford has made a few smart moves in recent months, analysts said. In particular, the company is slowly phasing out the U.S. production of traditional passenger cars in favor of trucks and SUVs.
"I actually liked the move to get away from building sedans that are just not profitable," said Kelley Blue Book analyst Rebecca Lindland. "That would make sense for a lot of companies."
Many people think Ford still has the potential to turn itself around. Hackett is a "visionary leader," Jonas said, but markets need more convincing.
The company reports its third-quarter earnings after the markets close Wednesday.
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