DETROIT -- Ford Motor Co. said on Wednesday a planned shift in production at a Michigan plant to trucks from less profitable cars will lead to an improvement of more than $1 billion in operating earnings.
The increase in earnings, before interest and taxes -- in 2021 compared with 2017 -- is due to the shift at the Michigan Assembly Plant in suburban Detroit from the C-Max hybrids and Focus compact cars to the Ranger mid-sized pickup truck and Bronco SUV, Ford said. The Ranger went on sale in January and the Bronco will be launched next year. Ford sold 9,421 Rangers in the U.S. during the fourth quarter.
The information was disclosed in slides prepared for a presentation that Ford's Jim Baumbick, vice president of enterprise product line management, is making at a Bank of America Merrill Lynch conference in New York on Wednesday.
Ford shares rose 1.7 percent to $9.52 in early afternoon trading on Wall Street.
"The absolute change in profitability is over $1 billion EBIT and we expect over the long, normal cycle, that to continue to improve," Baumbick said. "That's just an example of other choices that we're making in the portfolio that are going to unlock additional value."
Ford has been restructuring its operations globally to improve profitability and speed product development.
Ford is making product shifts elsewhere that are similar to those at the Michigan plant. Baumbick declined to provide details but said there were a couple of cases in which Ford was making "major changes in the overall profit contribution" from one vehicle to another.
In 2017, Ford built about 200,000 C-Max and Focus vehicles and will assemble more than 200,000 of the Ranger and Bronco vehicles in 2021, when the latter is at full production, Baumbick said.
Ford invested $850 million in the suburban Detroit plant, in Wayne, Mich., to retool for the pickup and SUV.
Baumbick said Ford will not chase volume over profitability with any launches. "If the better business has a slightly lower volume, then so be it," he said.
Ford gets 150 percent of its operating profit from its strongest products, such as F-150 full-size pickup trucks and Transit vans, The focus is on shifting investments to areas that offer operating profit margins in the high teens on a percentage basis, Baumbick said.
He also said a Ford Mustang-inspired battery electric crossover that Ford plans to introduce next year would be profitable from its launch and build on company strengths, just like the upcoming electric F-150 will do.
