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Ford's 2017 profit misses Wall Street estimates

By Joseph White
A sign of Ford is pictured at a car dealership in Mexico City, Mexico January 9, 2018. REUTERS/Ginnette Riquelme

By Joseph White

DETROIT (Reuters) - Ford Motor Co <F.N> on Tuesday estimated financial results for 2017 and 2018 that fell short of investor expectations, in a downbeat forecast that contrasted with a more positive outlook from rival General Motors Co <GM.N>.

Ford Chief Financial Officer Bob Shanks told analysts at an investor conference in Detroit on Tuesday that higher costs for metals and other materials, as well as currency volatility, could cost the U.S. automaker $1.6 billion in 2018.

"We are not satisfied by our performance," Shanks said. "We are excited about our future."

President of Global Markets Jim Farley said that Ford's business structure was "out of sync with our revenue," and vowed to cut costs by sharply reducing the variants of high-volume Ford models, and slashing marketing costs.

Ford shares dropped more than 2 percent in extended trading after it released its forecast, but later recovered most of the losses. Ford said it would pay shareholders a $500 million, or 13 cents a share, extra dividend for the first quarter.

Differing outlooks for 2018 from GM and Ford highlighted how the two largest U.S. automakers have been on diverging roads for the past year.

GM Chief Executive Mary Barra has led a dramatic overhaul of the No. 1 U.S. automaker, selling its unprofitable European operations, exiting troubled Asian markets, and giving the green light to investments in self-driving vehicles and an expanded portfolio of electric vehicles.

GM projected 2018 results in line with the $6.00 to $6.50 a share adjusted earnings forecast for 2017, and promised higher profit in 2019. GM shares closed up slightly, after a gain of about 2 percent earlier in the day. Wall Street has bid up GM shares by 18 percent from a year ago.

Ford shares are up only about 4 percent from a year ago. In May, Ford's board ousted then-Chief Executive Mark Fields, and installed former Steelcase Inc <SCS.N> CEO Jim Hackett. Hackett has promised to slash the company's product development costs by $14 billion, and has launched reviews of the vehicle lineup.

Ford's forecast reinforces a caution Hackett gave investors last fall, when he said the cost-cutting and product strategy changes could take time.

For full-year 2017, Ford said adjusted earnings would be $1.78 per share, below analysts' estimate of $1.83, according to Thomson Reuters I/B/E/S.

For 2018, Ford expects adjusted earnings of $1.45 to $1.70 per share. Analysts on average expected earnings of $1.62.

In a nod to the importance investors are placing on alternatives to traditional auto manufacturing, Ford said it would start reporting separately the results of its investments in "mobility" businesses, such as self-driving delivery vehicles and ride services, and previewed a loss for those operations of $300 million for 2017.

Ford's highly profitable F-series large pickup franchise will face aggressive challenges from GM and Fiat Chrysler Automobiles NV <FCHA.MI> <FCAU.N>, as those rivals crank up their own respective production of new generations of large pickups. GM's new Chevrolet Silverado and Fiat Chrysler's 2019 Ram are both designed to chop at the F-series' lead as the best-selling vehicle line in the United States.

(Reporting by Joseph White, Additional reporting by Ankur Banerjee in Bengaluru and Nick Carey in Detroit; Editing by Matthew Lewis and Rosalba O'Brien)