Ford calls an end to U.S. automobile boom, rivals wager other method

© Reuters. Ford logos are seen at the assembly line of the Ford vehicle factory of Saarlouis

By Bernie Woodall and Joseph White DETROIT (Reuters) – Ford Motor Co (N:-RRB- on Thursday declared the U.S. car market’s long healing is at an end, sending its stock and those of rival car business toppling. “The growth is over,” Ford Chief Financial Officer Robert Shanks told Reuters in an interview. Shanks previously anticipated U.S. light automobile sales would fall in 2016 from the record of 17.47 million in 2014, and fall again in 2017. Bottled-up demand built throughout the last economic downturn has been pleased, and lower utilized vehicle costs are drawing some purchasers far from new vehicles, he said, including nevertheless, “We’re not discussing a collapse.” Ford’s warning put at center stage an argument that has actually been running for months in Detroit about how much even more the long bull market in U.S. car sales has to run. The dispute has repercussions. Based on its forecasts, Ford said it will accelerate cost cutting and cut North American production in the 2nd half of the year. That might affect employees’ incomes, payments to providers and service vendors, and investment strategies. Ford shares skidded 8.2 percent on Thursday. General Motors Co (N:-RRB- stock fell 3.2 percent and Fiat Chrysler Vehicles NV (N:-RRB- shares shut down almost 4.8 percent. Mike Jackson, the head of AutoNation Inc (N:-RRB-, the largest U.S. auto dealer chain, has cautioned for much of the year that U.S. vehicle need is hitting a plateau, and has actually called on automakers to control production to avoid overstocking vehicles, particularly small cars. AutoNation reports second quarter results Friday. GM and Fiat Chrysler, nevertheless, are taking more positive stands, forecasting continued strength in U.S. and North American vehicle need. GM last week raised its outlook for full-year outcomes and reported stronger margins in its North American operations. Chief Executive Mary Barra informed experts recently average costs for GM vehicles were up $1,500 in the 2nd quarter from a year back. She predicted “continued momentum” in the second half as the business releases new models and increases production of trucks and sport utility vehicles. Fiat Chrysler said previously this week it anticipates North American need to “remain strong” and President Sergio Marchionne predicted “positive rates going forward” in the market. Nevertheless, Marchionne warned that unless the company can negotiate more competitive labor deals with the United Auto Employees, it will stop building sedans and compact vehicles in the United States. The depression in Fiat Chrysler’s sedan sales shows a more comprehensive shift – no longer is customer demand strong across all market segments and body designs. The call on the North American vehicle market matters to investors because U.S. sales of light trucks and SUVs create the bulk of worldwide earnings for GM, Fiat Chrysler and Ford. Ford stated it anticipates the U.S. economy to grow 1.9 percent to 2.3 percent this year, lower than Ford’s previous expectation of 2.1 percent to 2.6 percent development. The Federal Reserve last month cut its forecast for U.S. economic development to 2 percent from 2.2 percent in March. SIGNS OF STRESS Ford on Thursday reported weaker-than-expected profit in the second quarter, and its results revealed signs of tension in numerous ways. In North America, revenue grew 2 percent to $23.8 billion for the quarter. However discount rates took $999 million more out of the latest quarter’s pretax revenue than in the second quarter a year back, and pretax earnings in the region fell by 5 percent to $2.7 billion. “The competitive environment has actually increased as need has slowed,” President Mark Fields stated during a teleconference with financiers. “This has led to higher market rewards … as different competitors safeguard their share.” Ford’s operating vehicle margin in The United States and Canada was 11.3 percent during the quarter, below 12.2 percent a year earlier. Shanks said Ford thought it could sustain North American margins in an 8 to 10 percent variety from peak sales to trough. Experts stated some of Ford’s problems appeared related to product and competitive issues, instead of macro-economic elements. “GM stated just recently that it will have more truck production in the 2nd half of the year to satisfy some need that they have actually been leaving on the table,” said David Whiston, automobiles expert with Morningstar. On the other hand, Ford will be taking on heavy expenses to roll out a brand-new line of Super Responsibility trucks. Also, Shanks stated a weaker British pound following the June 23 vote by Britain to leave the European Union, referred to as “Brexit,” cost the business about $60 million in the second quarter. The 2016 effect of Brexit on Ford is anticipated to be $200 million, he said, and each year until Britain leaves the EU will cost the business $400 million to $500 million, Shanks stated. Ford stated its costs likewise increased for security remembers, which are counted as part of its net income. The expense to cover recalls relating to air bag inflators made by Takata Corp (T:-RRB- was about $100 million in the quarter, Shanks said.

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