Ford Q1 profits dragged down by warranty costs

Fri, 25 Apr 2014

General Motors isn't the only Detroit automaker posting falling profits in the first quarter. Ford just released its Q1 2014 financial data, and it reported a net income of $989 million, down $622 million from Q1 2013. The drop is partially blamed on higher warranty and recall expenses than the company had anticipated.

Financially, Ford suffered a rough quarter almost across the board. Its pre-tax profit of $1.4 billion was also down $765 million from a year ago. Things were even worse in the North American market where operating profit fell significantly to $1.5 billion, down from $2.392 billion in Q1 2013. However, its global revenue ticked up slightly to $35.9 billion, from $35.6 billion in this period in 2013.

Ford admitted that it spent about $900 million on expenses that it hadn't planned for during this quarter. According to Reuters, the company paid about $400 million in additional warranty and recall costs in North America. The automaker didn't explain why the costs were so much higher than expected. However, in the last three months, Ford has had several recalls, including on the 2001-2004 Escape for rust, Explorer for its steering, Edge for its fuel line and others.

There is some good news in the report, though. The Blue Oval's Asia Pacific division had record profit of $291 million, compared to a loss of $28 million last year. This was partially due to record market share of 4.5 percent in China. By the end of the year, Ford forecasts having $7 billion to $8 billion in profit, and it's launching 23 new vehicles worldwide this year. The entire report can be downloaded as a PDF, here.

By Chris Bruce