Ford Motor Company today outlined its plan for growth over the coming years, which remains optimistic despite that its adjusted pre-tax profit is anticipated to come in below 2015’s record high.
Ford President and CEO Mark Fields says that the automaker will strengthen its core business while investing in new, emerging opportunities – a strategy which, Ford admits, will most likely mean take a bite out of 2017’s profits due to the costs associated with pursuing mobility, drivetrain electrification, and self-driving technology. Mr. Fields reiterated Ford’s plan to invest $4.5 billion into new electrified vehicles by 2020, pursue the goal of putting a fully-autonomous car on the road in 2021, and expand its suite of mobility services worldwide.
No rough dollar figures were included with those latter two items, but they will indeed cost the automaker in the short-term.
In the long-term, however, Ford’s gamble on such emerging opportunities could pay-off big. The automaker today committed to deliver an operating margin of 20 percent or more with regard to its “emerging businesses,” vs. a commitment of 8 percent or more for its core business. “As we expand to be an auto and a mobility company, we’re not moving from an ‘old’ business to a ‘new’ business. We’re moving to a bigger business,” says Mr. Fields. “The world is moving from simply owning vehicles to owning and sharing them. That’s why we are expanding to sell more vehicles and provide transportation services at the same time.”
As for strengthening Ford’s core business, the automaker is fixing to overhaul those components which have traditionally underperformed – luxury vehicles, small vehicles, and some developing markets, for instance. Ford’s Lincoln luxury division is already halfway there with its recent reinvention, and has seen a 77-percent uptick in sales globally since 2012 thanks in-part to its successful 2014 launch in China. Ford’s small-vehicle profitability could be boosted – at least in North America – when the automaker shifts all regional small-car production south to Mexico and simplifies complexity to further reduce costs.
Finally, Ford is taking a good look at how to lead in emerging markets – weakened markets like Russia and South America, where the automaker expects an economic recovery, and markets where there is an apparent path to future profitability, like the Middle East and Africa. Details as to how Ford could expand, diminish, or otherwise alter its business in these areas were not divulged.
All-in-all, “we expect Ford’s performance to be strong through 2018 – with our core business improving, allowing us to invest in the emerging opportunities that will ensure our future success,” says Ford Chief Financial Officer Bob Shanks. “Our capital allocation continues to be disciplined and to deliver strong returns, and we are fully prepared for a downturn.
“As a result, we plan to offer a secure regular dividend through the business cycle with an option for upside on investments to keep our core business strong and to win in emerging opportunities.”