Ford cuts the profit forecast for 2014-2015

The second largest US automaker announced during an investor meeting yesterday that its predictions for the pretax profit in 2014 has been trimmed to $6 billion, lower than the previously forecasted $7 billion to $8 billion.

The main reasons for the recalculation were the higher than expected costs incurred from recalls in the North American region, coupled with higher than previewed losses in Russia and South America.

Analyst estimates for the company's 2015 pretax profit ($10.6 billion) have also been higher than what executives have in view, as Bob Shanks, Ford's chief financial officer, added that the carmaker expects the figure to be in the ballpark of $8.5 billion to $9.5 billion.

The first investor day under the command of the recently named Chief Executive Mark Fields, who came to office and replaced Alan Mulally on July 1, sent shares of the company tumbling 7.5% to $15.11 on Monday at the closing, while after-hours trading sent them lower to $15.

Fields commented on the bad news, saying the situation is only temporary, ahead of "a growth story," with CFO Shanks adding the operations that lose money today are expected to reach profit margins of 7 to 9% in South America and 3 to 5% in Europe, respectively, by 2020. The South American unit is now expected to incur higher losses, at almost $1 billion, while recalls in the North American region would cost Ford in 2014 another $1 billion.

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