Ford shares slide after weaker-than-expected 2020 forecast

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© Reuters. The corporate logo of Ford is seen at Brussels Motor Show

By Ben Klayman and Paul Lienert

DEARBORN, Mich. (Reuters) – Ford Motor (NYSE:) Co shares nosedived on Tuesday after it handed investors a weaker-than-expected 2020 forecast, warning that quality problems, lower profits at its credit arm and continued investments in unprofitable self-driving cars would weigh down profits.

Shares in the No. 2 U.S. automaker fell 9.7% in after-hours trading.

“The results were not OK in 2019,” Ford Chief Financial Officer Tim Stone told reporters at the company’s headquarters outside Detroit. “As I look to 2020 and beyond, I’m very optimistic.”

Ford said it expects 2020 operating earnings to be in the range of 94 cents to $1.20 a share. Analysts were expecting $1.26 a share.

The disappointing 2020 forecast, coming after Ford previously trimmed its 2019 outlook, is a blow for Chief Executive Jim Hackett.

Hackett, who took over in May 2017, has been asking investors to be patient with a restructuring that has seen the formation of a wide-ranging alliance on electric vehicles with Volkswagen AG (DE:) and the sale of its money-losing operations in India to a venture controlled by India’s Mahindra & Mahindra.

By Ford’s own accounting, the restructuring is far from complete. It has booked $3.7 billion of the projected $11 billion in charges it previously said it would take, and expects to book another $900 million to $1.4 billion this year.

For the fourth quarter of 2019, Ford reported a net loss of $1.7 billion, or 42 cents a share, compared with a loss of $100 million, or 3 cents a share, a year earlier.

The quarter included a loss of $2.2 billion due to higher contributions to its employee pension plans, something it disclosed last month.

Excluding one-time charges, Ford earned 12 cents a share, three cents below what analysts had expected.

Revenue in the quarter fell 5% to $39.7 billion, above the $36.5 billion Wall Street had expected.

Ford’s adjusted free cash flow fell 67% in the fourth quarter to $500 million, including the $600 million cost of bonuses related to a new labor deal with the United Auto Workers union. The UAW deal also played a role in driving North American automotive profit margins down to 2.8% in the fourth quarter.

Ford said its operating losses in China last year totaled $771 million, including a loss of $207 million in the fourth quarter. It lost $1.5 billion in 2018. Ford’s market share in China in the fourth quarter fell to 2% from 2.3% last year.

In December, Ford said it would halve its operating loss in 2019 and nearly halve it again in 2020, followed by further improvement in 2021.

However, that forecast was before the appearance of a fast-spreading coronavirus in China, which has killed more than 420 people globally so far and crippled China’s economy.

Ford’s China sales fell about 15% in the fourth quarter and 26% for the year as it continued to lose ground in its second-biggest market. Ford has been struggling to revive sales in China since its business began slumping in late 2017.

Detroit rivals General Motors Co (NYSE:) and Fiat Chrysler Automobiles are scheduled to report their results on Wednesday and Thursday, respectively.