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Ford's Audacious Plan to Save $25 Billion: Cut Every Car Except These Two Models

Bloomberg

Ford Motor Co. is sharpening its cost-cutting knives and cleaving another $11.5 billion from spending in the coming years to reach an elusive profit margin target ahead of schedule.

The automaker now expects to save $25.5 billion by 2022, Chief Financial Officer Bob Shanks told reporters Wednesday as Ford reported first-quarter earnings per share and revenue that beat estimates. The company now expects to reach an 8 percent profit margin by 2020, two years earlier than it had been targeting.

A turnaround has eluded Ford even after the board ousted its chief executive officer almost a year ago. New CEO Jim Hackett has been trying to convince investors that betting on a Ford turnaround is worth the wager by laying out a plan to get rid of slow-selling, low-margin car models and refocus the company on more lucrative sport utility vehicles and pickups. That’s similar to the road map Fiat Chrysler Automobiles NV has followed on the way to pulling ahead of Ford in North American profitability.

“Everything will be on the table” to fix Ford, Shanks told reporters in Dearborn, Michigan, where the company is headquartered. “We can make different investments, we can partner, we can exit products, markets — and we will do that.”

Ford reported first quarter adjusted earnings of 43 cents a share, topping analysts’ average estimate of 41 cents. Automotive revenue rose to $39 billion, exceeding the average projection for $37.2 billion in a Bloomberg survey.

The shares rose 0.5 percent to $11.17 as of 4:22 p.m. in New York, after the close of regular trading.

Ford is expecting commodity costs will be a $1.5 billion headwind this year, with about $500 million of that coming in the first quarter, Shanks said.

In a statement, Ford said it won’t invest in new generations of sedans for the North American market, eventually reducing its car lineup to the Mustang and the all-new Focus Active crossover coming out next year. By 2020, almost 90 percent of its portfolio in the region will be pickups, SUVs and commercial vehicles, the company said.