Ford Motor (F 0.72%) reported its fourth-quarter earnings on Feb. 4th, and the results were a trainwreck. The company's ongoing restructuring program is dragging down top-line numbers while failing to deliver meaningful results on the bottom line. How long will investors have to wait to see management's long-term strategy for the company?
Ongoing restructuring
Ford is currently embarking on an ambitious, $11 billion restructuring program. The strategy was announced in July 2018 and is designed to cut fat and eliminate redundancies in the business. However, investors are yet to see any benefits from the costly and long-running undertaking.
Ford's fourth-quarter reveals that revenues are declining, as expected, but margins aren't improving fast enough to make it worthwhile. In the key North American region, where Ford decided to axe most of its sedan lineup in favor of Trucks and SUVs, margins are declining in tandem with falling revenue.
This calls the effectiveness of the restructuring into question.
Top-line weakness
Source | Getty Images
Ford reported revenue of $39 billion in the fourth quarter -- a 5% decline from $41.8 billion in the prior period. This result was driven by top-line weakness in every international region.
North American wholesale unit sales fell by from 738,000 to 681,000, a decline of 8%. While U.S revenue fell from $25.9 billion to $25.3 billion, a decline of 2%. In Europe, wholesale units fell by 4% from 361,000 to 346,000 while revenue fell from 7.4 billion to 7.1 billion, a decline of 4%.
The Chinese business saw wholesale units decline 7%-- from 171,000 to 159,000 while revenue dropped a staggering 38% -- from $1.6 billion to $1.0 billion. Ford hoped to turn its Chinese business around by launching a slew of new products. But clearly, that isn't working.
Bottom line weakness
With Ford restructuring its global business, investors should expect top-line declines. However, Ford's bottom line is also declining at an unsustainable clip, and that's a bad combination.
In North America, EBIT margins fell from 8.8% to 2.8%, a year-over-year decline of 64%. Margin improvements in Europe and China were unable to offset the massive decline in North America because those regions have smaller sales volume. Total company EBIT came in at $500,000, a 67% decline from the prior-year period.
More Pain Ahead
Ford's problems may be more intractable than management is letting on. The company is failing in every single region, and the restructuring is doing little to fix the problem. Ford's fourth-quarter result was a trainwreck, and investors can expect more pain ahead unless management can come up with a more effective strategy.
