What's going on?
Ford, the US’s second-biggest carmaker, cautioned investors on Wednesday that its profit for last year would be lower than hoped – and was fuzzy on details of its 2019 outlook.
What does this mean?
Ford said that its annual profit for 2018 would come in at the lower end of the range it told investors to expect in October, thanks to a weak fourth quarter. While the iconic motormouth claimed that this year things would be better – with a greater focus on America’s favorite trucks and SUVs defying stalled auto sales growth worldwide – the lack of specific details for 2019 frustrated investors. Local rival General Motors, by contrast, was gushing when giving its own rosy forecast last week.
According to data from FactSet, 17% of Ford’s sales come from Europe, where it’s currently planning to slash jobs. And fresh figures out on Wednesday are unlikely to change its mind. European vehicle sales declined in December for the fourth month in a row, crashing 9%, with new emissions tests and slow Chinese drive to blame.
Why should I care?
For markets: Goodyear got blimped.
Ford’s stock fell on Wednesday, leaving it down 16% for the year so far. General Motors’ stock, meanwhile, has risen 14% in 2019 (tweet this). But slowing global car sales don’t just impact carmakers. On Tuesday, shares of Goodyear screeched to their worst day in seven years after the tire giant warned its own 2018 profit would miss expectations. No prizes for guessing where the smell of burning rubber was coming from: weaker sales in China and Europe.
The bigger picture: Strap in for the future – we’re going to 88.
Earlier this week, Ford announced a major alliance with Germany’s Volkswagen (probably the world’s biggest car company) to jointly produce commercial vans and trucks. The deal, which also predicts deeper partnership on electric and self-driving vehicle technologies, is likely to lead to significant savings on research and development costs – and increase the pressure on pioneer Tesla.