Pension Payment Change Cuts Ford Profit 38%

A change in Ford Motor Co.’s pension accounting dropped the company’s full-year net income to $4.6 billion last year from $7.4 billion. Adjusted pretax profit slipped 4% to a second-best $10.4 billion.

Ford cautioned a week ago that its results would take a $3 billion pretax hit in the fourth period because it no longer amortizes payments to pension and other retiree benefit plans.

The company’s vehicle sales for the full year were flat at 6.65 million units. Revenue rose 1% to $151.8 billion.

Net profit in the fourth quarter, which totaled $1.9 billion 2015, swung to an $800 million loss. Wholesales fell 4% to 1.71 million units, dragged down by a 13% decline in North America. Automotive revenue declined 5% to $36 billion worldwide and 7% to $23.1 billion in North America.

Ford’s fourth-quarter pretax earnings on automotive operations dropped 12% to $2.0 billion, in line with the company’s forecast. The company’s operating margin, which gained 0.3 points to a record 8.5% in the period, finished the year at 6.7%.

By region, fourth-quarter wholesales fell in North America (-13% to 703,000 units) but rose in South America (+13% to 90,000) and Asia Pacific (+9% to 483,000). Sales were flat at 390,000 units in Europe and dropped 24% to 41,000 in the Middle East/Africa.

Regional pretax profits in the fourth quarter included $9 billion in North America, a record $1.2 billion in Europe and second-best $627 million in Asia Pacific. The company lost $1.1 billion in South America and $302 million in the Middle East/Africa.

Ford Motor Credit Co. reports a 28% drop to $398 million in fourth-quarter pretax profit. For the full year, the financial services unit saw pretax profits drop 10% to $1.9 billion. Ford says results reflect rising credit losses and worse-than-expected residual values on leased vehicles.