Audi Motor Co (F) Announces First Quarter 2019 Results Transcript – The Motley Fool



[ad_1]

Logo of jester's cap with thought bubble.

Source of the image: The Fool Motley.

Ford Motor Co (NYSE: F)
Calling the results of the first quarter of 2019
April 25, 2019, 17:30. AND

content:

  • Prepared notes
  • Questions and answers
  • Call the participants

Prepared notes:

Operator

Hello ladies and gentlemen. I'm calling Ian and I will be your conference operator today. I would now like to welcome all participants to the Ford Motor Company 2010 First Quarter Results Teleconference. All lines have been muted to avoid background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions) After the Q & A session, there will be closing remarks.

At this point, I would like to give the floor to Lynn Antipas Tyson, Director General, Investor Relations.

Lynn Antipas TysonExecutive Director of Investor Relations

Thanks Ian. Welcome everyone to Ford Motor Company's 2010 First Quarter Results Call. Today we have Jim Hackett, our president and chief executive officer; and Bob Shanks, our CFO. Jim Farley, President of Global Markets; Marcy Klevorn, President, Mobility; Joe Hinrichs, President of Global Operations; and Brian Schaaf, CFO of Ford Credit.

Jim Hackett will begin with a brief review of our progress on our overall restructuring, followed by a brief commentary on the quarter. Bob will follow with a more detailed look at our results, then we'll go to questions and answers. After question period, Jim Hackett will make some closing remarks.

Our results discussed today include some non-GAAP references. These are reconciled with the most comparable US GAAP measures listed in the appendix of our results table, which you can find with the rest of our results documents at shareholder.ford.com .

Today's discussion includes forward-looking statements about our expectations for future performance. Actual results may differ from those shown and the most significant factors that could cause actual results to differ are included on slide 40.

In addition, unless otherwise indicated, all comparisons are made from one year to the next. EBIT, EPS and the Company's operating cash flow are adjusted and the volume weighted product line is adjusted.

Now, let me give Jim the floor.

James HackettPresident and CEO

Thank you Lynn and good evening everyone. Before starting the official comments tonight, I welcome Tim Stone, who joined Ford Motor Company on April 15th. Tim will assume the role of CFO on June 1st and we could not be more excited to see him join our team at such an important time in our transformation.

I also want to take this opportunity to thank Bob Shanks. Bob has left an indelible mark on this company during his career of more than 40 years. As a CFO, he spared no effort in getting results and pushing the company higher. He has also been an excellent colleague, led with integrity. Now this part is out of the way, and the chief financial officer that Bob has been for Ford Motor Company is an extremely wonderful human being. The world is better with Bob and my team decided to just give him a standing ovation.

Robert ShanksFinancial director

I will keep a blushing face.

James HackettPresident and CEO

Another way to feel Bob blush. D & # 39; agreement. So, let me move on to our results, which we believe indicate a positive momentum for Ford. Our strong results this quarter, if you look at slide 2 and the recent strategic initiatives, show two things in our mind. First, we have a solid plan to create value in the short and long term. The year 2018 was a pivotal year for Ford as we developed a fundamental overhaul of our entire company. This was necessary to simultaneously strengthen our core business, while making the necessary investments to become a successful player in the future. We know that the industry, our industry, is entering a period of profound disruption and reinvention.

Secondly, we are acting decisively and giving impetus to this global overhaul of our society. The year 2019 is a year of action as we aim for a lasting improvement in several key indicators, including growth, profitability, cash flow and return on capital.

Now, if you look at slide 3, titled A 2019 Action Year, let me focus on some of the key enablers. Let's start with the winning wallet. Throughout the world, we are strengthening our franchise's strengths in trucks, commercial vehicles and performance vehicles, as well as our SUV lineup, with a unique approach to electric vehicles that builds on our leading brands. more solid. And as you saw a year ago, we are phasing out vehicles that can not grow and offer the high returns needed. And as you'll see – as you'll see when Bob examines our results, these stocks are already generating an improved mix with higher transaction prices and higher average margins.

If you are considering fitness, I have often talked about the state of our competitiveness. We are improving our operating leverage, lowering our break even point and reallocating capital to more profitable investments.

For example, over the entire planning period, we now plan to spend 91% of our capital on trucks, utilities and crossovers. And we will achieve this while reducing the capital intensity of the entire company. We expect these measures to generate higher operating cash flows, which will be driven by Automotive.

Partnerships are an essential part of Ford's fitness. To that end, we have strengthened our alliances, as you know, with VW and Mahindra. And yesterday, we were proud to announce a partnership with Rivian.

Then I want to focus on our overall overhaul. We are accelerating that. Our recent listings in Western Europe, Russia and South America, as well as the overhaul of our global management structure, show how we are streamlining our cost structure, portfolio and footprint to ensure The company as a whole, in each of our regions, sustainable and profitable growth. I want to talk a little more about it in a moment.

Finally, if you look at smart vehicles for a smart world, we have the opportunity to help create a better transportation system that will make life better. To this end, we have decided to connect to modems, almost all of our new vehicles, and leverage this connectivity to continually improve our vehicles and services and create better experiences for our customers. We know that this will build loyalty and generate recurring revenue streams.

Well, for your information, by the end of the year, 100% of new vehicles sold in the United States will be equipped with these modems and by 2020, 90% of our new vehicles in the world will also be equipped with modems. So, at the same time, we are putting building blocks in the form of platforms to help us realize our vision: smart vehicles for a smart world. Examples include Autonomic Transportation Mobility Cloud or we call it TMC. It is the world's first car cloud.

Earlier this week, we announced a global agreement with Amazon to have our TMC powered by Amazon Web Services. This is great news because it extends the availability of cloud connectivity services and connected car application development services for the entire transportation industry. In addition, we launched the FordPass awards. Now the FordPass has been downloaded 6.4 million times and we now have 3.8 million registered members. We expect the growth of these members to accelerate. We also announced FordPass Pro. This is for our fleet vehicle customers.

Return to autonomous vehicles. We have selected a third city for commercial operations and commercial deployment, and we plan to announce the venue later this year. In addition, Argo AI has recently received a license to test antivirus in California, making it the fifth state in which we are currently testing.

If we can move to slide 4 and you see the ads at the top. Here are some of the key initiatives we have announced or taken so far this year. Our North American operations continue to approach their long-term EBIT margin of 10%, with measures to improve their efficiency and reduce costs. North American companies will also benefit this year from a significant wave of product launches, including wonderful badges for us, Ranger, Super Duty, Explorer and Escape, as well as exciting new entries for Lincoln. In fact, by the end of 2020, we will have replaced 75% of our current US product line.

We have also taken steps to increase the production of Expedition and Navigator in Kentucky for the second time, in order to meet a still strong demand, more than 40% higher than our forecasts. We have announced the extension of the electrical and audio-visual capacity of the batteries in Michigan, and we will optimize the costs by implementing the new generation of Transit Connect for North America, Mexico rather than North America. ;in Spain.

You can see the progress we are making on our first quarter results as North America has generated a 2% increase in its revenue, despite declining sales and volume of sales. large. At the same time, the EBIT margin increase of 90 basis points reached 8.7%.

In South America, we are moving to a less asset-based business model. The team made very difficult decisions. One was getting out heavy trucks and closing our facilities in Sao Bernardo. Through our collective approach and collaborative approach, we work to minimize the short-term impact on all our stakeholders.

We are also engaged in redesigning our European business as we have targeted a profitable business in a sustainable manner that offers an EBIT margin of 6%. Our future operations will be leaner, more focused and will leverage the strengths of profitable franchises in commercial vehicles and utilities. We plan to significantly reduce our cost base by eliminating product lines generating losses and adjusting our manufacturing footprint.

For example, we announced the closure of our transmission plant in Bordeaux, France. We announced the restructuring of our joint venture in Russia. We have proposed separation programs in Germany and the United Kingdom, and we have confirmed the phasing out of two of these products, the C-MAX and C-MAX Grand models, later this year.

If you look at slide 6, I would just like to go back to a decision we made a year ago when we announced our decision to phase out sedans in North America. Now, remember, we want customers to understand the silhouettes they prefer to be the ones we will bring them. So, in fact, we do not intend to lose any of these customers in the long run. And now, in hindsight, it was absolutely the right call. This slide highlights the benefit of thinking about a winning wallet. We plan to improve the annual profitability of our Michigan assembly plant by more than $ 1 billion once we have completely reduced the production of Ranger and Bronco, which are currently being built at this plant.

D & # 39; agreement. Let's look at slide 7, and I want to cover the financial highlights here, and before we go to Bob, let me talk about the quarter. We have achieved good results, which is in line with our current vision that we will achieve better business results in 2019 than we did last year. Compared with the difficult quarterly comparison compared one year on the other, the company's adjusted EBIT and margin rose despite a decline in wholesale sales and products, while we have increased our investments for future opportunities in Mobility.

On an adjusted basis, our EBIT increased 12% to $ 2.4 billion. Margin increased by 90 basis points to 6.1% driven by the EBIT margin of 8.7% that I mentioned in North America. We also had a EPS of $ 0.44, which pleased us with the big success, but we also improved compared to the previous year. These results clearly demonstrate the benefits of our fitness initiatives, difficult portfolio decisions and ambitious business reorganizations, all of which are underway and we expect all these actions to generate more.

Finally, we generated adjusted operating cash flow of $ 1.9 billion and closed the quarter above our cash and cash flow targets of $ 24.2 billion in cash. and $ 35.2 billion in total cash. Needless to say, the team and I are very encouraged by the good start to the year.

That said, let me leave this call to Bob Shanks for his latest quarterly review as CFO. Bob?

Robert ShanksFinancial director

Thank you Jim and good evening everyone. I would like to start with four key points. First, the results for this quarter are of high quality and are based on the key physical characteristics of the business. Second, while the turnover statistics were lower than the previous year, the decline in the company's revenues was mainly due to the exchange of a balanced composition and higher net prices which offset lower volumes. And even though our market share was down, our share in trucks and commercial vehicles is increasing, and we expect performance improvements in the utilities sectors as we launch new and, in some cases , new market entries over the next two years.

Third, the adjusted EBIT of companies, the best since the second quarter of 2017, has improved despite external headwinds of about $ 0.5 million compared to last year . This includes the reduced volume of the industry, the continuation of these smaller increases and the cost of commodities, including the effects of tariffs and exchange rates. This impact of $ 0.5 billion does not take into account the prices of about $ 100 million that we used in South America to partially recover the adverse effects of inflation and currency exchange rates. the region.

Fourth, and most importantly, we have seen progress in each of the three regions that has led to the decline in the Company's EBIT from one year to the next; China, Europe and North America, and I will address each of them.

First, in China, we suffered a $ 128 million loss due to lower volumes. This was an improvement over the $ 150 million lost a year ago, which was by far the best quarterly result in 2018. In fact, to put the current quarter in context, our average quarterly loss was from last year. $ 465 million. As a result, the improvement in China compared to a year ago is attributable to our consolidated operations, partially offset by lower net income from JV shares.

The main elements of the consolidated improvement were a strong performance in terms of costs and a favorable exchange rate, although we also found a favorable distribution and obtained uniform prices compared to the previous year in a price environment. unfavorable. The favorable currency effect was essentially the reversal of the equivalent negative impact suffered by China over the past two years. The decrease in the net income of the shares of the joint venture is entirely due to the decrease in volume. Importantly, we ended the quarter with healthy reseller actions and improved profitability. Although China still has a lot of work to do to find sustainable profitability, we are encouraged by the first progress made by Anning Chen and his team. Thus, for the full year, we expect to build on the first quarter results and significantly improve profitability over the previous year, although this is still a loss.

In Europe, we were profitable, but at a lower level than last year, which was explained more than a little over $ 100 million in unfavorable trade, including a balance sheet effect. Among European results, we achieved solid EBIT and good returns for our burgeoning truck and truck business. This decline was partially offset by losses on passenger cars, although these continue to generate positive operating cash flow for the current period. As you know, the redesign of activities in Europe is under way and is progressing well. We will have more and more to share with you during the year. For the full year, we expect a substantial improvement in profitability from the prior year, thanks to a favorable mix, higher net prices and higher costs. low.

With respect to North America we have achieved our best EBIT since the second quarter of 2018 and, as Jim has mentioned, our margin is 8.7%, improving compared to the previous year. 39, last year. The team achieved this goal with a solid combination and higher net prices, helped by slightly lower structural costs than in the previous year. From a product point of view, the improvement in EBIT in North America was driven by our F series, despite the new competitive challenges. Ranger, as he came to the market; and Transit, the best-selling van in America. The EBIT of the region has also benefited greatly from the decision to pull out traditional sedans.

The strong financial performance of the F Series was accompanied by a strong performance in the market. During the quarter and in the face of new competitive inflows, F-Series sales and average transaction prices were flat compared to the prior year, while the sector's share increased. And from there, our plan is to strengthen our position with the launch of the new Super Duty later this year, a new F-150 coming in 2020, followed by a BEV shortly thereafter. For the full year, we expect EBIT and margin improvement in North America starting in 2018.

We are now moving from regions to our automotive sector. We saw an improvement in EBIT compared to a year ago. The performance of North America has a direct impact on the auto sector, the combined loss in regions outside North America being unchanged from the previous year. ;last year. However, this represents a significant improvement of $ 630 million compared to the fourth quarter. In the automotive industry, costs were stable compared to the previous year. As a result, we generated strong operating leverage during the quarter, resulting in an EBIT margin increase for the Automotive segment. For the full year, we expect an improvement in the EBIT of the auto sector, driven by gains in China, Europe and North America.

Turning now to Financial Services, Credit Ford has achieved a very high pre-tax profit, the highest in almost nine years. All of Ford's credit indicators were sound, including the introduction of a lean operating cost structure to the best of its class. During the quarter, Ford Credit benefited from reduced amortization of vehicles in our leased portfolio and improved credit loss reserves, reflecting continued strength in consumer credit statistics. For the full year, we now expect that the EBT at Ford Credit will be about the same as in 2018. This includes the prospect of a continued decline in the value of auction approximately 4% on average on a constant basis.

In our mobility business, we have recorded and increased our loss of EBIT as we invest more, as planned, to strengthen our capabilities to win in the future with mobility services while leveraging connectivity of our products while advancing our self-reliance development. For the year as a whole, we anticipate a greater loss of mobility as we increase our investment in mobility services and our audiovisual efforts become closer to commercialization. a tailor made product end of 2021.

To operating cash flows adjusted by the company. In the first quarter, we generated $ 1.9 billion, mainly in the auto sector. As mentioned, the cash and liquidity balances at the end of the quarter were well above our targets.

Now that we are talking about liquidity, we earlier this week extended our corporate revolver by $ 13.4 billion and entered into a new $ 3.5 billion additional credit facility, strengthening our liquidity and providing flexibility increased financial Unlike our corporate revolver, the additional facility is intended for use and includes the $ 2 billion revolver and a $ 1.5 billion deferred term loan. We expect the term loan will be fully utilized during 2019. However, the impact of any drawdown will be neutral if we take into account the debt reduction measures taken at the end of last year. , including the repayment of about $ 1 billion of affiliates at higher cost. debt.

Let's move on to the special elements of the quarter. This represents an EBIT loss of close to $ 600 million with negative cash flow effects of approximately $ 100 million. The vast majority of expenses recorded during the quarter were associated with the redesign of Europe and South America. As you will recall, last year we had identified potential EBIT charges of approximately $ 11 billion for our restructuring actions globally, with effects of negative cash of about $ 7 billion, throughout the period of our plan, but mainly until 2021. This year we plan to commit $ 3 billion. EBIT with negative cash flow effects of approximately $ 2.5 billion. We expect almost all EBIT costs to be treated as exceptional items.

Compared to our other costs and capital for the year, we continue to expect operating expenses to be similar to last year. Pension contributions are expected to be approximately $ 650 million and distributions to shareholders approximately $ 2.6 billion.

Before going to the question period, a few summary comments. Our first – our quarter view is that it's a very good start to the year for the company. And while we expect our first quarter EBIT to be the strongest of the year, due to seasonal factors and significant product launches, it is clear that we are on track to deliver better results for the first quarter. 2019. Because of our focus we are on improving the physical condition throughout the company, the work on our product portfolio, the refittings of our company and our disciplined approach to capital allocation. The company is now moving in a positive direction, although we continue to invest in future opportunities.

We clearly have a lot of work ahead of us, but we have a solid plan and we demonstrate the ability to effectively execute a heavy work statement, while achieving stronger business results. Our opportunity and strong intention over the coming months and quarters is to build on the momentum we generate and generate some of the best returns in our industry on a sustainable basis.

Operator, we would now like to move to Q & A.

Questions and answers:

Operator

(Instructions from the operator) Your first question comes from John Murphy, of Bank of America.

John MurphyBank of America Merrill Lynch – Analyst

Good afternoon guys. Good evening, should I say, actually. It's been a long day. Bob, I just want to congratulate you. The career has been long and I wish I had something in the slides to measure and give you a hard time, but the results were really good, so congratulations. But you understand that. Jim, just one – first question. When we look at tonight's slide discussions, it looks like you're looking a little deeper at the fact that the product is at the heart of society in the short term and in the long term, a little more than you have in the past . I mean, in the past, you've been a little more focused on technologies and future opportunities. Is your thinking really changing, maybe it's a change to 80/20 or something like that, because it seems like the product really is king and you start to understand it a little bit more in the short run Term and long-term opportunities are a little longer term.

James HackettPresident and CEO

Thank you John. No, I do not think there is any change at all. In fact, if I take you back to the arrival of this scheme in June 2017, one of the first things we attacked was the product portfolio. In fact, in the recent organization where Jim Farley and Joe take on new roles respectively, I explained to the company that we were not ready for this current organization in June 2017 because we had to put the product in shape. And Jim Farley, Joe and Hau, they did an incredible job in a very fast order.

If you think about the essence of this phenomenon, it is because it is in competition with the future, it is not the case, because when we transform the product, we think about the design of intelligent vehicles for an intelligent world. What must they really be able to do to enable what we will see in the future, including autonomy, connectivity and cloud interactions with cities. So these three things were – are in our thinking. The good thing is that the improved product portfolio is, of course, feeding the good news tonight, because that is what Ford is defending and it has not depreciated anything for the investment or the efforts dedicated to future technology.

John MurphyBank of America Merrill Lynch – Analyst

Awesome. And then just a second question. Je veux dire que le prix et la composition ont été extrêmement constructifs et positifs au cours du trimestre, mais peut-être que si nous nous concentrons sur la diapositive 25 et si je ne sais pas si cela concerne Joe ou Farley, vous obtenez un bénéfice positif de 1,259 milliard de dollars pour le trimestre et le trimestre. nous sommes toujours en train de regarder le baril avec beaucoup de produit sortant. Donc, je me demandais si vous pourriez peut-être nous donner un peu plus de détails sur ce qui est le facteur clé? Est-ce la série F? Est-ce qu'il se passe quelque chose avec la flotte et / ou la vente au détail? Y avait-il quelque chose de vraiment constructif peut-être du côté de Super Duty? Juste un très grand nombre et j'essayais simplement de comprendre ce qui se passe là-bas.

James HackettPrésident et chef de la direction

Yeah. Je vais donner cela à Jim Farley, John.

John MurphyBank of America Merrill Lynch – Analyste

D & # 39; agreement.

James FarleyPrésident de Global Markets and New Businesses, Technology & Strategy

Merci John. Regardez, F-Series est une franchise incroyable, John. Nous avons gagné des parts. Nous avons terminé le trimestre avec une part de 41% du secteur des camionnettes. C'est une augmentation de neuf dizaines (ph). Nous avions construit une position de leader sur le numéro deux avec près de 100 000 unités au cours du trimestre. Notre prix de transaction moyen s'élevait à un peu moins de 48 000 $ pour la série F et nous avons les dépenses incitatives les moins élevées pour l'un des principaux camions. Et ce fut un exercice de remise en forme important pour nous en termes de gestion du rendement.

Au cours du premier trimestre, l’un des principaux atouts de votre point de vue était le secteur commercial et le gouvernement. Nous avons connu une croissance de 11% au premier trimestre, ce qui est bien supérieur à celui de l'industrie. Les secteurs qui ont conduit à cela étaient les télécommunications et les services publics. Nous avons vu les taux de commande quotidiens augmenter. La force de Super Duty est vraiment l’une des facettes du trimestre. Et évidemment, nous avons également lancé Ranger. En fait, avec Ranger et la série F ensemble, nous avons eu notre meilleur trimestre de camionnettes en 15 ans.

Écoutez, nous avons beaucoup à faire avec le marché très concurrentiel, mais nous avons une excellente équipe et nous avons constaté une très forte demande pour notre produit. Et, comme l'a dit Bob, les portefeuilles de produits regorgent de nouveaux produits. Le nouveau Super Duty arrivera plus tard cette année et une toute nouvelle série F l’année prochaine. Nous avons donc une excellente franchise pour les services de connectivité et l’automatisation. Il y a un très fort trimestre pour nos camions.

John MurphyBank of America Merrill Lynch – Analyste

Et peut-être, si je pouvais, en glisser un dernier pour Bob. Il y a eu beaucoup de spéculations sur le possible déclassement de votre cote de crédit chez Moody's, mais avec ce que nous avons vu au cours de ce trimestre, il semble que cela aurait pu être évité. Je me demandais simplement si vous pensiez ce qu'il se passait ou si vous pouviez mettre à jour les métriques sur lesquelles nous devrions nous concentrer pour vraiment changer d'avis en ce moment?

Robert ShanksDirecteur financier

Yeah. Merci John. Évidemment, cela devrait venir des agences de notation. Mais nous leur parlons beaucoup. Nous pensons que nous comprenons très clairement les domaines d’amélioration qu’ils recherchent et que cela concerne les opérations. Comme je l'ai dit à maintes reprises, ce n'est pas le bilan, ce n'est pas la distribution (problème technique), c'est le côté opérationnel. Je pense donc que, bien qu’il ne s’agisse que d’un quart, du fait que nous ayons constaté une amélioration en Amérique du Nord, nous avons constaté une amélioration en Chine, même si beaucoup de travail reste à faire, nous avons réalisé un bénéfice inattendu en Europe, car une grande partie de cette refonte est encore à venir en ce qui concerne l’impact de cette modification et les modifications du portefeuille. Je pense que nous touchons les parties des entreprises dans lesquelles elles souhaitent une amélioration, et non pas seulement le quart de ce trimestre. Mais je pense que c'est une belle avancée en ce qui concerne les choses qui les préoccupent.

John MurphyBank of America Merrill Lynch – Analyste

Génial. Félicitations encore, Bob. Merci beaucoup.

Opérateur

Et notre prochaine question provient de la ligne de Colin Langan d’UBS.

Colin LanganUBS – Analyste

Génial. Merci d'avoir pris ma question. Pouvez-vous simplement nous donner l'impression qu'il y a eu beaucoup d'annonces au cours de l'année jusqu'à présent et de mesures de restructuration. Je veux dire, où en sommes-nous par rapport à ce à quoi nous devrions nous attendre pour l'année? Je veux dire, y a-t-il plus – la (difficulté technique) traverser l'année est-elle en grande partie de ce type et nous devrions commencer à voir les avantages à venir? Comment devrions-nous penser à ce qui pourrait être prévu dans le plan?

James HackettPrésident et chef de la direction

Yeah. Hi. Colin, je tiens simplement à souligner, car c’est important dans la confiance que je construis avec vous, si nous avons été très cohérents avec ce que nous avons commencé avec les initiatives de mise en forme en ce qui concerne notre cible et notre situation actuelle. Je vais donc laisser Bob remplir les blancs, mais il n’ya pas beaucoup de changements par rapport à ce dont nous avons parlé.

Robert ShanksDirecteur financier

Yeah. Colin, je pense que la façon dont je le décrirais est que les actions que nous entreprendrons ne seront peut-être pas nouvelles. Voir, par exemple, nous avons parlé de la refonte de l'Europe qui est en cours, mais nous ne vous avons pas donné beaucoup de détails à ce sujet, car nous sommes en train de discuter avec nos partenaires sociaux en ce qui concerne ce sera réellement. Nous nous attendons à ce que ce soit terminé quelquefois vers le milieu de l'année, puis nous commencerons à voir plus de détails. Donc, vous aurez plus de détails. Je ne dirais pas que c'est plus d'annonces. C'est juste plus de détails de ce que nous avons déjà annoncé.

Nous avons parlé du fait que nous discutons toujours avec VW et Mahindra au sujet de différentes opportunités. Donc là encore il n’ya rien de nouveau en termes de domaines, mais potentiellement plus en termes de résultats de ces discussions, ce serait évidemment quelque chose devant nous.

Donc, je pense que c'est plus – plus de clarté et plus de détails, et la façon dont je mettrais plus en contexte ce qui reste à venir est le commentaire que j'ai fourni sur les articles spéciaux. Nous n’avons que 500 millions de dollars au cours de ce trimestre sur les 600 millions de dollars, qui ont trait à la refonte des activités. Et comme je l'ai mentionné dans mes commentaires, nous nous attendons à des charges allant de 3 à 3,5 milliards de dollars pour l'ensemble de l'année. Donc, il va se passer encore beaucoup de choses sur le plan comptable, du point de vue comptable – ça va frapper les livres et ça va être les deuxième, troisième et quatrième trimestres.

Colin LanganUBS – Analyste

C'est très utile. Que diriez-vous de l'Amérique du Sud? Je pense que dans vos exposés précédents, vous avez montré qu'il existe – une rentabilité est très difficile, il n'y a pas beaucoup de produits rentables dans cette région. À la fermeture de l'usine, en avons-nous constaté les avantages au cours du trimestre? Et devrions-nous nous attendre à plus d'actions compte tenu des défis de cette région?

Robert ShanksDirecteur financier

Yeah. I wouldn't necessarily assume that the announcement of the action on Sao Bernardo is the complete redesign of the region, because it's not, there's more, and we'll announce things when it's appropriate to do so. You're not getting any effect of that action in the quarter other than the special items, because the plant is going to continue to run until toward the very end of the year. So there's no benefit today, but we do expect to have a good benefit. I think we've indicated a payback of about two years from that action. So there will be more to come from the actions in South America.

The thing to note there is Argentina has really been hit hard with a very deep recession extremely high inflation, that's affecting the industry. We're pricing this as much as we can, but we're frankly not keeping up with the inflation nor the effect on the exchange rate. So that's sort of a unique factor in the shorter term that certainly affected the business.

Over time, our history tells us we recover those effects but in the shorter term a bit of a challenge. The thing to me that's positive is, they basically held constant on a year-over-year basis without new product with the action in Sao Bernardo announced, with all this going on in Argentina, but they continue to find good cost performance that enabled us to keep the business where it was and so that was a win from our standpoint.

Colin LanganUBS — Analyst

D & # 39; agreement. Thanks for taking my question.

James HackettPresident and Chief Executive Officer

Thank you.

Operator

And our next question is from the line of Ryan Brinkman from JPMorgan.

Ryan BrinkmanJP Morgan Chase & Co. — Analyst

Great. Thanks for taking my questions. It looks like the faster than many expected improvement in China was really driven by cost and exchange rather than volume. The JVs on the British (ph) side, I know, are shown as a single bucket. But Bob you referenced volume being the main negative driver there. So the question is really, how to think about volume going forward for you in China? How should investors weigh? On the one hand, a still very soft industry with; on the other hand something pretty easy compares in the back half of the year and now this new comment that dealer stocks are in good shape. So are the product launches enough to allow you to grow in China, even in the current environment?

Robert ShanksChief Financial Officer

Let's — Ryan, let's turn that to Jim Farley.

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

Well, thanks for your question. Obviously, we're working really hard to stabilize our sales this year. We've launched a new product, as you know, and we've gotten very positive pricing. We do have opportunity for momentum in the second half of the year, but right now we're focused on stabilizing our sales. It's great to see the profitability improvement for the dealers and the stock. Stocks have come down, which is really a health measure for us, but right now we're looking at stabilizing our sales.

Robert ShanksChief Financial Officer

Yeah, I would — if I could add to that, the way that I would think about the business, Ryan, is we're really focused a lot on the dealer profitability and the margins they're earning. So we're being very thoughtful and very careful in terms of that particular part of the business. So we're certainly not pushing and driving for the volume. We're really kind of focused on dealer profitability and their engagement. So that's the number one priority.

So as a result of that I wouldn't expect to see significant if any volume improvement necessarily. This is really more of trying to get the margins back, particularly at dealer level, get the business stabilized on the locally produced front. The thing that's interesting that you see in the bridge is the — consolidated part of the business has turned around very, very sharply and very quickly. And that includes the imports of the Ford brand, those products as well as Lincoln, in fact, profitable frankly in the quarter and a substantial improvement year-over-year. So that part of the business that we control and have our arms around, we're making faster progress. We have a lot more work and are really doing a ground-up on the JV side.

James HackettPresident and Chief Executive Officer

Ryan, Jim Hackett here. I just — I take my gaze a little further on the horizon with China as you might imagine. And the earlier question that John asked about products and was that kind of a new leg under our stool, it's not. But I would admit that as we were rationalizing that product portfolio what became clear to me is that our position in China had — send it very quickly from where we started to where we hit at the peak was a function of we knew what the market was, but we lost track of that and we lost track of it in a way that was going to take advantage of the things that John was asking you about. It seems like you guys are getting your act together on the product portfolio. So we're applying what we've learned about getting the portfolio in shape as we start to fix China. So there's a longer-term opportunity here that we've got to prove to you that this team that really, I think, understands product and we've got a wonderful leadership team there. I just want to warrant to you that there's going to be better solutions in China for Ford than we're seeing right now.

Ryan BrinkmanJP Morgan Chase & Co. — Analyst

D & # 39; agreement. Very helpful. Thank you. And then just lastly for me. You've been warning about the sustainability of Ford Credit earnings for sometime now only to see the profit there just continue to inflect higher. You've been anticipating a normalization in used car prices from some of the data we're able to track. I thought we started to see that in 1Q, but you continued to record these big off-lease gains. Does the 1Q profit there cause you to think any differently about full year credit profit potential?

Robert ShanksChief Financial Officer

Well, it did actually, because in January, I think, we indicated that we thought the results would be lower than 2019 and 2018 and today in my comments I indicated that we expect them to be about flat, so that would be around $2.6 billion. We do not expect subsequent quarters to be at the level of performance in the first quarter. But if you — I mean, you've got last year's number $2.6 billion, we made $800 million. You can do the math, it will be a very healthy second, third and fourth quarter, but it will not be based on what we see today at the level of the first quarter.

Ryan BrinkmanJP Morgan Chase & Co. — Analyst

Great. Thank you.

Operator

And our next question is from the line of Adam Jonas from Morgan Stanley.

Adam JonasMorgan Stanley — Analyst

Thanks, everybody. First, I want to say congrats to Bob. And Tim, Bob has got the bar set a little higher for you, but don't worry stock — auto stocks go up 8%, 10% after quarter results, that's very normal, so just get used to it. So, first question is for Jim. Are we at peak trucks?

James HackettPresident and Chief Executive Officer

Are we at peak trucks? What's interesting and Jim Farley I know I think is the one you're after.

Adam JonasMorgan Stanley — Analyst

Both Jim.

James HackettPresident and Chief Executive Officer

D & # 39; agreement. I don't think so, because we've — in the face of some really good competition, we're doing very well, Adam, as you can tell. And Jim talk about where we are in the Series evolution right now, what we've been winning with versus what we're going to have.

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

Yeah. As you know, we updated the F-Series a year or so ago, which was great but we have really strong product coming, so that bodes well for our chances. For the market in first quarter, I think that the strength for Ford in commercial and government was a really important sign. We saw sectors, including for the growth of Transit for package delivery, telecom utilities that really drove Super Duty F-Series and Transit sales in the US double-digit growth year-over-year.

So that's a really — those customers, as you know, are really driven by cost of ownership. They're very discerning customers. They want the best capability, but they also want the best efficient — most efficient vehicle. And I think that bodes really well. The other thing to mention is that, in the first quarter, for us, Ranger, we only sold about 10,000. We're just still ramping up Ranger and that was very strong demand. I think our average turn is like 18 days now for Ranger and that was incremental to our F-Series. So, for us, we have a very new product cadence. We have more coming and the strength of the commercial business is a good sign.

Adam JonasMorgan Stanley — Analyst

I have it. Thanks for that. Second question is on the suppliers. If global auto production continues to, let's say, flatline, deeper in the cycle and trucks don't provide as much incremental profit as they have up to now, how big is the opportunity for smart redesign, intelligently decontenting or rationalization of powertrain combinations that the consumer really doesn't care about or even noticed, I'd say extract some seriously better pricing or terms in your supply base, who in large part are out-earning you and tell us all the time that OEMs are just going to keep increasing content all the time and that they're just going to keep winning. Are they wrong? Is there an opportunity for you to kind of — I don't want to say turn the table, that sounds too adversarial, but just saying, come on, folks, pitch in here, we're going to simplify this and decomplexification can mean decontenting. How big of an opportunity is that for you? Thank you.

James HackettPresident and Chief Executive Officer

Thanks, Adam. And you know I love the question, because like some of the comments tonight this was one of the early things that we actually went after, which is in the fitness initiative. Joe Hinrichs, who is going to take this, and I have long talks about product complexity and how getting that right would start to be the gift that kept on giving. So, Joe, you might talk about our efforts there and…

Joseph HinrichsPresident of Global Operations and Automotive

Sure. Thanks, Jim, and thanks for the question, Adam. I think certainly from our perspective one of the major fitness initiatives has been around capacity reduction and we're continuing to see good progress there. And it's not just decontenting, but putting the right content in the vehicles, especially as we think about to contemplate the new vehicles that we're designing for the future. I think what you're also seeing, of course, is the alliances and the partnerships that are taking place give us broader scale. When we partnered with Volkswagen on van programs, we have the opportunity to get together both for engineering savings but also from a capacity utilization and supply base and ourselves, improvement there as well.

So you're seeing a number of these partnerships start to come around, which are also helpful with how we work with the supply base for scale. I wouldn't necessarily condition it like it's an adversarial relationship, because there is an increase in technical componentry and content going into the vehicle, because of all the capabilities that Jim's been referring to in the Smart Vehicles For A Smart World, but rationalization of the powertrain portfolio is certainly a huge opportunity for all of us as we start this transition into electrification. So those are the kind of areas I think you'll see progress, alliances, powertrain and also just leveraging the scale of the industry has to better utilize the supplier's capacity.

Adam JonasMorgan Stanley — Analyst

Thanks, everybody.

Joseph HinrichsPresident of Global Operations and Automotive

Yeah.

Operator

And our next question comes from the line of David Tamberrino from Goldman Sachs.

David TamberrinoGoldman Sachs Group Inc. — Analyst

Great. Bob, congratulations. First question, as I think about the cadence of your net cost savings, benefits you're achieving from Jim's fitness initiatives, should we be really circling the structural cost improvement of $309 million in the quarter and the Slide 23 walk, or is there another level or a hidden layer of cost savings that you're already seeing achieved in the P&L?

Robert ShanksChief Financial Officer

Yeah, that's a good question. I mean, obviously every quarter is a bit variable, but I think the important message from today you can take from the quarter that applies to the full year particularly on structural cost is that they're not going up. And that's probably inclusive of headwinds on a lower level of income from pension and OPEB. As you know, that's been declining for sometime, declining again this year several hundred million dollars. So that's inclusive of that. And that's an important element, because when you think about the contribution costs and material costs and we're making a lot of progress there for the earlier comments from Joe there is an element of those increases that do come with the higher pricing and so forth. So it's not just pure cost, it's costs that gives us the benefit. So that structural cost capping if not slight reduction is going to make a huge difference in terms of our operating leverage, which is what's driving the improvement in margin.

David TamberrinoGoldman Sachs Group Inc. — Analyst

I have it. As a second question, curious as to what the company's plans are and what it has embedded within its long term 6% margin guidance for Europe in terms of spend to meet the CO2 emissions that are tightening?

James HackettPresident and Chief Executive Officer

Yes. Thank you, David. This is something that we've talked a great deal about and I think I'm delighted with where Ford is relative to what's happened in Europe. I'll let Jim share more here.

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

Yeah, great question. Obviously, earlier this month the European team shared our plans to expand electrification from mild hybrids all the way to full electrics and it's a really aggressive plan with 16 electric vehicles. One of the things that's just such a differentiator for us in Europe is our strength of commercial vehicles. And so, although there are cost going in for electrification and CO2 compliance, especially for 2025, we're in a really good shape to continue to nurture that commercial vehicle business which is really profitable and has more upside. For example, in the first quarter, we gained almost 0.5 share point in our commercial business. So although there are more costs going in in Europe as you say for the more stringent requirements in 2025 with the 15% reduction, we have the opportunity on the commercial side to continue to grow our profitability.

David TamberrinoGoldman Sachs Group Inc. — Analyst

D & # 39; agreement. But no quantification of how much you think that's going to put incremental costs in your vehicles for the region?

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

No, I'm not going to share that.

David TamberrinoGoldman Sachs Group Inc. — Analyst

D & # 39; agreement. Bob, if I may, a comment on the press release attributed to you in regards to the seasonal earnings with 1Q being the strongest of the year. Can you elaborate on that a little bit further? I think a lot of the investors will have a question on that.

Robert ShanksChief Financial Officer

Yeah. I mean usually the first and second, not every year but the first or second quarter is usually the strongest of the year. In this particular year, we have a lot of launches that are taking place after the first quarter. And while coming out of the launch, that's a lot of opportunity for us. The launch itself because of lower volume launch expenses we start to amortize the investment and so forth. It is a bit of drag over a short period of time. So that's ahead of us.

Also, as you know, in the third quarter, Europe shut down its plants for four weeks, so there's no production. North America does it for one or two weeks, so you've got in general lower volume in the third quarter, because of that impact as well. In the fourth quarter, because of the end-of-year holiday and that 10 days or whatever, we end up sort of draining the inventory that we have across the system. And so, therefore we have more labor and overhead, but it's just an inventory for most of the year and it kind of flows out and goes into the income statement in the fourth quarter.

So that's a downward pressure there. So those types of things. We're still going to have good quarters coming forward. It's just we want to signal that you shouldn't think of the first as a run rate. It's a very good quarter. We've done better in the first quarter before. So now we need to restrain our enthusiasm, but we are extremely pleased with the start to the year, because it gets us off to a good start in the year that's got a lot of heavy work ahead of this, but it's a wonderful way to begin that journey.

David TamberrinoGoldman Sachs Group Inc. — Analyst

Appreciate all the colors. Thank you very much. Congratulations, again, Bob.

Robert ShanksChief Financial Officer

Thank you.

Operator

And our next question is from the line of Rod Lache from Wolfe Research.

Rod LacheWolfe Research — Analyst

Hello, everybody, and congrats to Bob from us well, really enjoyed working with you over the years and I do wish you the best. I'm interested in just following up on some of the questions about China and the China plan. You had $160 million of structural cost reduction year-over-year in the quarter and it seemed like a lot of the restructuring that you were pursuing actually started late in the quarter. There was a shift, for example, to Nanjing from Shanghai. Can you talk a little bit about what we should be expecting going forward, what the magnitude of the structural cost reduction could be to correspond with your plan?

James HackettPresident and Chief Executive Officer

Yeah. I just want to remind everybody that this is on the consolidated part of the business. So just to simplify what need to think about, so that's the net engineering, so that's the engineering we incurred net of the royalties we've received as the vehicles are produced. It is the import business, both Lincoln brand and Ford brand. It's the overhead of the team that's there in Shanghai. There's also a portion, which is a component sales that we ship the components into the JVs and so that's a piece of it as well. So I'm just talking not about what's happening in the JVs, which is where the bulk of the business is, but in that portion I just described. And so, what we've been focusing on is driving down costs as quickly as we can. We've seen less engineering, less manufacturing expense from — this is also fitness right, this is fitness of Ford on the imported vehicles that's now benefiting China, those vehicles go over. Certainly, Anning Chen has been thrifting out and addressing the size of the workforce in Shanghai. That's an opportunity that's probably more ahead of us in the quarter, but it has begun. So it's really broad-based, it's not any one thing, it's across the board, but the results have been very encouraging in the first quarter. And I would expect kind of look at the full year, but that would be an important element of what will be the improvement of the loss that we had last year in China relative to what we delivered this year.

Rod LacheWolfe Research — Analyst

So just to clarify, is this the run rate of year-over-year cost reduction or do you anticipate that it actually increases from here?

James HackettPresident and Chief Executive Officer

I think, it's pretty representative. It's going to be plus or minus.

Rod LacheWolfe Research — Analyst

Got you. And just broadly on strategy. Maybe this is a question for Farley. You're consolidating in almost every region the segments that have very strong brand equity. So in Europe you're going to be mostly in commercial trucks in the Ranger, on South America presumably at some point a lot of it's going to be pickup trucks, and in North America let out what you guys are emphasizing now is brand — is products with very strong brand equity that's established. China is obviously very different. There — it seems like there are a lot of new products, it's expanding pretty widely. Obviously, it's a tough market. It's a fragmented market and you're a 2% player there. So could you just maybe from a 30,000 foot view, just help us understand what you want to be in this region, how broad do you want to be, and what kind of investment you're willing to put behind that?

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

Well, thanks for your question. First of all, we have — I just want to reiterate the ambitions we have to grow our utilities business globally. We have a great opportunity in North America and in Europe with our utilities. For China, the story is a growth story. I mean, as Anning shared last week with his 30/30 plan; in the next three years, we have 30 new products, a lot of those utilities. You can expect Ford to really lean into utility space. If you see the success we've had in Territory, which is the new nameplate for us, that's great, but we have the opportunity to localize a lot of utilities in China and also refresh the products that are at the very end of their life cycle. So you can expect China to be a growth story for Ford over the next several years as well as a lot of localization and a growth in our utility lineup.

Rod LacheWolfe Research — Analyst

Do you have a target market share or sort of size of the business that you'd like us to ultimately achieve?

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

Yes.

Rod LacheWolfe Research — Analyst

Could you share that?

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

No.

Rod LacheWolfe Research — Analyst

D & # 39; agreement.

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

I think it's best just — Rod, just to leave it with our growth ambition. I mean, that's the most important.

Rod LacheWolfe Research — Analyst

Great. D & # 39; agreement. Thank you.

James HackettPresident and Chief Executive Officer

Thank you, Rod.

Operator

And our next question is from the line of Brian Johnson from Barclays.

Steven HempelBarclays — Analyst

Yes, hi. This is Steven Hempel on for Brian Johnson. Just wanted to drill down a little bit further into the North American profit improvement here. Maybe just discuss how to think about the sustainability of North American EBIT for the year and maybe discuss the quarterly cadence throughout. I suppose maybe a two-part question split up between kind of cost, including the launches, I understand obviously launches are going to ramp up for the remainder of the year but maybe discuss which quarters you expect to see the largest year-over-year headwind from those launch costs? And then secondarily pricing, which has been obviously key strong year-over-year tailwind now for the past two quarters, maybe discuss that business and the key drivers of that North American pricing improvement in the quarter, bucket it up between F-Series yield management and any others we might be missing?

Robert ShanksChief Financial Officer

Yeah. I guess the way I would describe it is, first of all, quarters are unpredictable to some extent. But I actually — as I look ahead based on what we see now for North America, I think every quarter should be a pretty good quarter. There will be plus or minus where we are this quarter, but I think every quarter looks good, strong. They are benefiting or being hit by the things I touched on earlier. But, in general, I think strong performance by North America throughout the year. It will be feature costs that are relatively flat, in fact flat if you exclude the impact of the pension and OPEB that I referenced earlier. The volume probably is not going to be as great, so that will be a headwind in part that's at best (ph) the industry that's coming through.

But in addition what you'll see that will drive the business will be favorable mix and you'll have very strong pricing throughout the year and against that flat cost it really just kind of flows right through to the bottom line. I would refresh everyone's memory. I think we talked about this at Deutsche Bank. There is a new contract this year. So with UAW — so in the fourth quarter in general there's a large charge that we usually pick up once the ratification is achieved and that's probably to the tune of about $0.5 billion or so. And I mentioned that back in January. So that would be something that would be unique and one-time in the calendarization of the results in North America this year.

James HackettPresident and Chief Executive Officer

And Steven I got to slip this in, because I don't know how close you've been to Ford, but the management team that's running North America is exceptional Kumar Galhotra was put in that job and we're just reviewing today kind of their serial quarter-to-quarter-to-quarter kind of improvement that they've generated. In fact, he from a method standpoint was one of the first parts of the world to build this new flat agile structure with these energy rooms. This is all serious commitment to moving faster and moving collegially across the company, reducing bureaucracy and it's been copied. And now I just add that the people leading the other parts of the world have similar kind of talent. So when Bob just talked to you about the way to think about the rest of the year, I was thinking about the guy running it and want to make sure you know how solid he is.

Steven HempelBarclays — Analyst

Yeah, that's definitely helpful. I guess switching gears here internally a little bit south to South America (technical difficulty) more so specifically the long-term outlook. Basically to your payback for the current restructuring that's in place, which basically roughly flat or breakeven, which is clearly an improvement from where we're at today. But how do we think about this business long-term? It's move back in 2014 you mentioned our long-term target of 7% to 9%. I'm not sure if that's realistic anymore given you're exiting some of the businesses, but maybe this. And I guess is it more realistic to maybe think that Ford will actually exit South America completely and redeploy capital to higher margin businesses?

James HackettPresident and Chief Executive Officer

Yes, I think where we are today is consistent message that I've said that we have the right or wrong design in these markets. And so, you're seeing us tackle both in Europe and South America as examples that are now playing now. As Jim Farley has talked about the portfolio strategy there, we're working on a better design for South America. And that's more to come there, but these initiatives to get us in shape so that we have the right cost structure and all that, we'll be followed by really the right kind of things to win in those markets with where we want to play them with.

Operator

And our next question is from the line of Joseph Spak from RBC Capital Markets.

Joseph SpakRBC Capital Markets — Analyst

Thanks, and I wanted to tackle my congratulations to Bob. First question is just turning back to China. I think in the past, something else you mentioned that was impacting was widening royalty, and I think that was in impact in the back half of last year and also some of the excessive structure in the Shanghai regional office. I was wondering if you talk about how you think those two things trend as we move through 2019?

James HackettPresident and Chief Executive Officer

Well, we've worked hard on both of those.

Robert ShanksChief Financial Officer

Yeah, the net engineering actually is still going to be a substantial drag on the business in an absolute sense, but it will be less so than what it was in 2018. Obviously, part of that very much dependent on the volume, because that is what drives the royalties. And you asked me about the central admin costs, is that what you're asking me?

Joseph SpakRBC Capital Markets — Analyst

Yeah.

Robert ShanksChief Financial Officer

Yeah, we would expect to see improvement there, probably more second half-weighted than first half as Anning is working through the redesign of his organization. But, yes, there will be an improvement in that that will contribute toward the year-over-year lessening of the loss this year.

Joseph SpakRBC Capital Markets — Analyst

But that's still to come that's not in the results we're seeing today?

Robert ShanksChief Financial Officer

I would say, first — I think, we've seen some improvement in the quarter, there's no question about that, but I think there's more opportunity ahead.

Joseph SpakRBC Capital Markets — Analyst

D & # 39; agreement. And then turning back just a question about the CO2 compliance in Europe. I understand you're not going to sort of give us the cost but maybe you could just help us understand — I mean, I think it's a mass-based target, so maybe where are you or what is your actual target and where is the portfolio today?

Robert ShanksChief Financial Officer

As you know, between now and 2025 or compared to 2021, the CO2 targets for our passenger cars and commercial cars are a bit different. And so, I think by 2030, the current regulation is about a 30% improvement in — or reduction in CO2 for LCV and more for passenger cars. In the short term, obviously, we had the 6.2 emissions last year in the second half, which Ford really weathered very well. And between now and 2021 , there's another new set of requirements, which we are in a good position for, because of our new lineup. But the requirements in Europe really start to ramp up between 2021 and 2030 with the new regulations from the EU.

James HackettPresident and Chief Executive Officer

So the parallel, Joe — the parallel is that, it couldn't have been better coincidence which is at the time we're trying to figure out the redesign in Europe and the product portfolio going forward, we were aware of this kind of influence. So, we've been addressing that all along in the strategies.

Joseph SpakRBC Capital Markets — Analyst

D & # 39; agreement. Thank you.

Operator

And our next question is from the line of Itay Michaeli from Citi.

Itay MichaeliCitigroup — Analyst

Thank you. Good evening, And Bob, congrats. So I wanted to ask a high level question in North America, because this is the third quarter in a row where you're growing EBIT with the declining SAAR. And clearly a lot of investors (technical difficulty) start the analysis looking at the SAAR when seeing that lot of your profitability has been driven by the F-Series franchise and so forth with the fundamental seem very, very different from SAAR for a long time. I guess the question is, as you think about how investors might appreciate results like this, what are the merits and the pros and cons to disclosing the F-Series franchise or the pickup truck franchise separately to let investors see kind of what's the key drivers away from the SAAR itself?

James HackettPresident and Chief Executive Officer

Well, we have the option of doing that. And in fact in couple of the disclosures we've made over the last — what a year or two? We've provided sort of segments and things of that sort, trucks or whatever high-performing products. So we're starting to show you more on a product line basis. I don't know where that will go frankly. As you know, one of the big changes in our organization has been to provide a much — I call the third leg of the stool of the lens on the business. We've got central. We've got core teams' regions. Now, we're going to have a much stronger product line focused, that's our EPL-amortization (ph) that Jim and Bob talked about at the conference last week or so.

So I think — and my comments give you a little bit more texture than what we have in the past. The improvement in North America was driven by the trucks. But I have to tell you also the improvement was driven by the fact that decision we made around the passenger sedan. That was hundreds of millions of dollars or will be over the course of the year. So that's not immaterial, but it's something that we have the option of doing, I suppose. It's not how we report the business, but we will be very thoughtful going forward, Itay, in terms of what we do with this information to and for our investors going forward.

But clearly and I know your thesis and we don't disagree with that. Ford Motor Company has a moat of trucks, particularly F-Series but not just F-Series. We're the biggest player in the world on vans. The Ranger we're number two or three depends on how you cut it and that's without North American in the mix and now we're going to combine forces to some extent with VW, who is also a strong player. So more to come I guess on that.

Itay MichaeliCitigroup — Analyst

That's really helpful, Bob. And may follow-up — maybe for Jim on the expansion in the autonomous development to other cities. I'd love to get a bit more on color on decision behind that. And the reason I ask this, because some of the — your other competitors seem to be consolidating testing in like one particular city just to kind make sure that they are able to kind of conquer that city first. So to get an understanding of kind of decision to expand that, I think you mentioned California testing as well and kind of what going on into that, as well as give us kind of updated size of the testing fleet over the next maybe year or so?

James HackettPresident and Chief Executive Officer

Yeah. I appreciate that, Itay. I think — let me, I'm going to ask Marcy Klevorn to help me with this, because she and I just were in Pittsburgh two days ago for a full day reviewing with Jim Farley kind of our developments there. I want to report this — what a great team we have in Argo AI and take you back to Miami. When we brought investors and media there, I think we got at large really thumps up from the experience — intentional is the fact that we're testing in some really challenging areas. I mean, I don't want to pick on any competitor, because it's not my purpose but you could put these vehicles in places where the weather never changes, there's not a lot of intense urban kind of challenges, mostly everyone's retired and the road stone change a lot. I mean we've opted into some really difficult settings to prove this capability. So Miami's going really well, Washington D.C. all of us on the call and the table have been in that city, so you know the challenges. And in fact the long-term viability of this capability is it's ability to work in cities. And so that's why I think you're going to love the Ford position. Now to the direct part of your question in how we're picking cities and where we are going from here I'll let Marcy fill in what the plans have been.

Marcy KlevornPresident, Mobility

That's a great question. And as you say some are choosing to focus in a limited geographic location. And in that regard it might be easier to rack up here like point A to point B miles, where we believe to build on Jim's comments is that complex miles are more important. And so, we're picking cities, as Jim said, like Miami that are very complex, who does (inaudible) heard Senator Brandes's opening remarks. He said Miami was a black diamond city, because it has so much going on in the city and we embrace that, napped it, and for those of you that participated or that read about it, saw that it was a (inaudible) show that we could handle complex miles, different types of construction, different types of activity in the city, a bilingual city and doing that well. So now we are on to D.C. We've got a third city selected for deployment, which we'll announce later this year, but if they continue to really build out complex miles.

And in conjunction with that, we also do, which is partner with businesses, so we've announced the likes of Postmates and Walmart, we're also partnering with local businesses to become a part of the fabric of this city. And that helps us learn how cities operate in urban settings, very important, it helps us to learn how to monetize the autonomous vehicles in the future by working with local businesses and these big partnerships. And then finally it helps inform the SDS self-driving system software in addition. And that's really important, because over time as standards emerge and legislation takes place, pieces of that will have to be codified and those pieces in the SDS will become a commodity like happens over time in technology. And so, because we're learning these complex situations, because we're learning how we might monetize working with these businesses, we will be left with some IP that will help us set us apart. And then, finally, to build on Jim Hackett's idea around human-centered design. It helps us really to learn more about in these complex situations how humans want to interact with the vehicle and help us build those human-centric use cases into our thinking and into our testing.

James HackettPresident and Chief Executive Officer

Yeah. We laughed and if autonomy was only destined for the LA freeways, you don't have to deal with dogs and baseballs running across them and no need to recognize that. And so the argument that you see in the press about how intense the LIDAR commitment has to be is a function of that. It's our intent to have these things perform really safely, as I've said. Another interesting thing is that, we've been intentional about the way we think about the external environment in the vehicle relating to each other. And I've been on record at the CES Talk a year ago describing how cities are going to be communicating back to the vehicles and vice versa. We're experimenting with that in all these tests. So there's a lot more in terms of the system's evolution that I think is going to be wonderful to talk about as we get there.

Marcy KlevornPresident, Mobility

And to answer your second part of the question about how many vehicles, we'll have 100 on the road by the end of this year.

Operator

That concludes the Q&A. I'd like to turn the call back over to Jim Hackett for closing remarks.

James HackettPresident and Chief Executive Officer

Thank you. And before we close again, I want to welcome Tim. Bob, thank you for an incredible service. I want to reinforce four key points. First, we have a solid plan to create value in the near and long term. We believe we're gaining credibility with you that we're doing as we said. We also — as we said, this was the year of action and making these decisions, building momentum with the global redesign of the company as we target sustained improvement across key metrics. And we're mindful of growth, profitability, cash flow and returns as we do that. Third, our results this quarter could clearly demonstrate the benefit of fitness actions, portfolio decisions that we've labored over and the business redesigns. And we do want to assert that there's more to come there. And, fourth, we want you to know that we really do believe we've delivered a solid quarter. It's not just one thing, it's across the board. And we now believe we're on track to deliver better company results for this full year and recognize in parallel that we have a lot of work ahead of us. So, thank you for joining the call tonight.

Operator

This concludes the Ford Motor Company First Quarter Earnings Conference Call. Thank you for your participation. You may now disconnect.

Duration: 73 minutes

Call participants:

Lynn Antipas TysonExecutive Director of Investor Relations

James HackettPresident and Chief Executive Officer

Robert ShanksChief Financial Officer

John MurphyBank of America Merrill Lynch — Analyst

James FarleyPresident of Global Markets and New Businesses, Technology & Strategy

Colin LanganUBS — Analyst

Ryan BrinkmanJP Morgan Chase & Co. — Analyst

Adam JonasMorgan Stanley — Analyst

Joseph HinrichsPresident of Global Operations and Automotive

David TamberrinoGoldman Sachs Group Inc. — Analyst

Rod LacheWolfe Research — Analyst

Steven HempelBarclays — Analyst

Joseph SpakRBC Capital Markets — Analyst

Itay MichaeliCitigroup — Analyst

Marcy KlevornPresident, Mobility

More F analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

[ad_2]

Source link