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Ford’s profit decline is poised for a reversal this year

WILMINGTON, Del. – Ford Motor Co. President and CEO Mark Fields, presiding over his first annual meeting, addressed shareholder concern about the company’s lagging stock by promising that the company is poised for a profit liftoff in the year’s second half.

“We’re poised for a breakthrough year for our company,” Fields told shareholders Thursday at the automaker’s annual meeting. “We expect our results will grow progressively stronger, mainly in the second half, as the new products that we’ve been launching start to really pay off.”

Fields is working to restore the earnings growth that Ford experienced under his predecessor, Alan R. Mulally, who retired last year after engineering a turnaround of the automaker. Fields has said pretax profit will grow as much as 51 percent this year as the new aluminum-bodied F-150 truck reaches full production. Net income fell by 56 percent last year, to $3.19 billion, as Ford introduced a record 24 new models, and turmoil in Russia and South America contributed to wider international losses.

“We’re not thrilled that the stock hasn’t moved in a year or two, but we think they’re doing the right things,” said Michael Levine, a fund manager at Oppenheimer Funds in New York City, who said Ford is the fourth-largest holding in the $6.4 billion equity income fund he manages. “When Fields came in, the Street probably underestimated some of the costs in transitioning from the old F-150 to the new one.”

Since Fields become CEO last July 1, Ford shares have fallen by more than 11 percent. The stock declined by 0.9 percent Thursday, closing at $15.27, down by 14 cents, while the Standard & Poor’s 500 rose by 1.08 percent.

At the meeting, two shareholders noted that Ford’s stock has lagged behind the S&P 500 for the last one, two, five and 10 years.

“I continue to be disappointed in Ford’s stock price and low capitalization in this historic United States bull market,” Roger Heymann, a shareholder from Rockville, Md., told Executive Chairman Bill Ford. “When will we see an increase in Ford profits? Toyota had record profits. Ford’s stock price can’t increase without larger profits.”

Bill Ford said that as a significant shareholder, he monitors the stock price daily, “if not hourly.” “In 2015, we’re on track to have a very good year,” Ford said. “If people are paying attention, I believe the stock price will take care of itself.”

After initial buyers of the F-150 snapped up fully loaded models in the first quarter, Fields last month raised his operating profit margin forecast for Ford’s North American unit to 9.5 percent, from 8.5 percent. He has said the company will post pretax income this year of $8.5 billion to $9.5 billion.

The F-Series accounts for 90 percent of the Dearborn, Mich.-based company’s global automotive profit, according to Morgan Stanley.

F-Series sales in the United States rose by 1.4 percent in the first four months of 2015 after falling by 1.3 percent last year. The truck was the nation’s top-selling vehicle for the 33rd straight year in 2014. The new F-150’s fuel economy increased by as much as 29 percent, primarily because the aluminum body trimmed the pickup’s weight by about 700 pounds.

Ford lost output of more than 100,000 trucks since the start of 2014 as it retooled two factories that make the model. A plant near Kansas City, Mo., began building the aluminum-bodied F-150 in March. “It took them out of the game for a while at a time when truck sales have been very, very strong,” Levine said. “Long-term, the move to aluminum is absolutely the right call. But it’s impacted results for the last three quarters, and it will impact them for another quarter or two.”

At Ford’s meeting Thursday, shareholders rejected a proposal to strip the founding family of its 40 percent voting control of the company and move to one vote per share. The vote was 63.7 percent against and 36.3 percent in favor. The family controls the automaker through Class B shares that only its members can own.