Profit at Ford Motor Co. dropped by nearly half in the three months through June as the car manufacturer struggled with challenges including a $280 million cost increase for raw materials like steel and aluminum.
Joining competitors General Motors and Fiat Chrysler, the Dearborn, Mich.-based company on Wednesday lowered its earnings outlook for the year amid a slowdown in sales in China, where the U.S. is engaging in an escalating trade dispute.
Costs for steel and aluminum, meanwhile, are climbing, benefiting U.S. producers and hurting their customers, as President Trump’s double-digit tariffs on the metals take effect.
Companywide, revenue dropped 2.3 percent to $38 billion in the second quarter, while Ford’s net income fell 48 percent to $1 billion.
The carmaker announced it would undergo an $11 billion restructuring effort that executives said would target under-performing aspects of the business, but Ford declined to provide any additional details. As a result, the company delayed a planned September investor meeting.
Solid results in North America were “offset in part by unexpected challenges with our overseas operations and headwinds in the business environment,” Chief Executive Officer Jim Hackett said in a statement. “Despite this, our fitness actions continue to take hold and we’re clearly committed to redesigning and restructuring the underperforming parts of our business.”
Ford executives blamed the lower profits in-part on the Trump administration’s trade agenda.
The earnings report reflects a “policy environment that’s increasingly uncertain causing real, unfavorable bottom line effects on the business, such as higher commodity costs, beyond normal cyclical effects, as well as tariff-related impacts,” Chief Financial Officer Bob Shanks said on the company’s earning call.
Hacket argued that businesses perform better when there is equilibrium in the global market and said the auto industry is learning how to manage the unexpected upheaval on trade.
“Who can speculate how long the uncertainty will stand, but we’re ready to deal with it,” he told investors.
To combat the sales slump in China, Ford said it would hire new individuals for top management positions and introduce new products, noting that 60 percent of its car offerings in the country would be updated by the end of 2019.
GM earlier in the day blamed higher steel prices — spurred by Trump’s 25 percent duty on imports — as a key reason why the manufacturer was reducing its profit outlook for 2018. Fiat Chrysler warned it expected the impact of the tariffs to hit in 2019.
