Ford Motor Co. share price slumps, slashes full-year pretax profit forecast to $6 billion

The second-biggest auto manufacturer in the U.S. – Ford Motor Co. revealed in an official statement that it expects to earn a full-year pretax profit estimated to $6 billion dollars, falling short of the targeted range of $7 billion to $8 billion due large car withdrawals and disappointing results in South America and Europe. At the same time, the company outlined aggressive plans to boost growth through the end of the decade.

According to the statement of the companys Chief Executive Officer Mr. Mark Fields, the expected pretax profit in 2014 will be from $6 billion to $7 billion, which is about $1.5 billion less than the results it had projected in July 2014. The reduced pretax profit forecast is believed to be due to warranty and recall expenses, which at around $1 billion were larger than initially expected, sales declines in Russia and a bigger-than-expected loss in South America. Mr. Fields also explained that some of the shortfalls were offset by achieving better than projected unit volumes and pricing.

“We know we have challenges in 2014,” Mr. Fields said to investors. “We looked at the reality, we deal with it proactively and we move on.”

The U.S.-based car maker told its investors that it expects a $900-million loss in South America in 2014 as its operations in the region were negatively affected by inflation and currency headwinds. A smaller, but still considerable loss was forecast by Ford for the region in 2015. In addition, the company projected a $1.2-billion loss in Europe in 2014 and a $250-million deficit in 2015, in comparison to an initially expected profit next year. Losses in Russia will amount to $300 million.

Ford also revealed that it expects warranty expenses of $1 billion in 2014, including $500 million for a withdrawal, which was announced last week, that amounted to 850 000 vehicles to replace air-bag modules.

Fords Chief Financial Officer Mr. Bob Shanks said in an interview, which was cited by the Financial Times: “Obviously, we didn’t anticipate South America or Russia . . . or the warranty or recall costs.”

Nevertheless, the US car maker remains determined to achieve its long-term goal of boosting vehicle sales by more than 3 million through 2020, winning Ford a place on the global top five sellers leader board. Fords Fields projects global auto industry revenue to surge to $3 trillion by the end of the decade, up from $2 trillion in the beginning of the millennium, and assured investors of Fords capability to overcome current problems.

Ford Motor Co. plunged by 7.47% on Monday in New York to close at $15.11 per share, erasing this years gains and marking a one-year change of -11.38%. The company is valued at $58.60 billion. According to the CNN Money, the 16 analysts offering 12-month price forecasts for Ford Motor Co. have a median target of $20.50, with a high estimate of $23.00 and a low estimate of 414.00. The median estimate represents a +35.67% increase from the last price of $15.11.