Ford’s First-Quarter Income Drops 36%

Ford Motor Co.’s net income in January-March fell to $1.6 billion from $2.5 billion. Adjusted pretax profit fell 42% to $2.2 billion.

Results, as Ford cautioned previously, were dragged down by recall and warranty costs, rising materials prices, unfavorable exchange rates and increased spending on new products, self-driving cars and ride-share services.

First-quarter revenue rose 4% to $39.1 billion in January-March in spite of a 1% dip in wholesales to 1.70 million units. Volume in North America dropped 5% to 771,000 units. The company’s market share in the region shrank to 8.3% from 12.9%, in large part because of a deliberate effort to reduce low-margin fleet sales.

But Ford says heavy demand for high-profit trucks and SUVs boosted its average retail selling price per vehicle in the U.S. by nearly $2,000—roughly four times the overall market average.

Regional pretax profits shrank in North America (-35% to $2 billion), Europe (-59% to $176 million) and Asia Pacific (-44% to $124 million). Losses narrowed slightly in South America (to $244 million from $256 million) but grew in the Middle East/Africa (to $80 million from $14 million).

Pretax profits generated by Ford Motor Credit Co. in the first quarter declined 6% to $481 million.

Ford reiterates that it expects full-year pretax profits to drop this year to about $9 billion from $10.4 billion in 2016, then revive in 2018.