Ford Motor Company (F 1.24%) released its guidance for 2018 at a conference for investment analysts last week. In a nutshell, the Blue Oval expects its 2018 profit to be lower than 2017's, largely due to rising commodities costs and unfavorable exchange rates.

In related news, Ford also said that it will change the format it uses to report its earnings, in part because it wants to help investors understand how much it's spending on future technologies.

Those changes are important. Let's take a closer look.

Ford's headquarters building, with part of its front lawn visible

Ford's world headquarters in Dearborn, Michigan. Image source: Ford Motor Company.

How (and why) Ford is changing the way it reports pre-tax results

Until now, Ford has reported "adjusted pre-tax results," meaning pre-tax profit excluding special items, for three broad segments: automotive, meaning the parts of Ford that are involved in creating, building, and selling vehicles; financial services, meaning Ford's captive-financing arm, Ford Credit; and a catch-all category for corporate costs called "all other." (Within automotive, Ford reports separate results for each of its regional business units.)

That's changing in two different ways, Ford CFO Bob Shanks said at the event last week. First, instead of reporting earnings before tax, Ford will report earnings before interest and tax (EBIT), bringing it in line with the practice of most of its peers. (Those numbers will still be "adjusted" to exclude the effects of one-time items, so as to give a clearer picture of the underlying state of the businesses.)

New: Results for future tech and "mobility"

Ford is also changing the way it divides up its adjusted EBIT in its report. It'll now report adjusted EBIT for four broad segments:

  • Automotive, which now excludes results for Ford's autonomous-vehicle (AV) development programs.
  • A new segment called "mobility" that includes results for Ford's AV programs, including engineering expenses, as well as results for Ford's future-mobility subsidiary, Ford Smart Mobility LLC.
  • Ford Credit, which is exactly what it sounds like.
  • The catch-all segment, which will now be called "corporate other."

Here's how that will look in Ford's upcoming earnings reports:

Slide showing Ford's old reporting format next to its new one

This slide from Shanks' presentation shows how Ford's preliminary 2017 results, also presented at the conference last week, would look under the old and new formats. Image source: Ford Motor Company.

Although investors often think of electric cars and self-driving as somewhat related technologies, I should note that Ford's finance folks don't. Shanks noted that Ford's spending (and eventually, hopefully, profits) related to its recently expanded electric-vehicle effort will be recorded in automotive, not mobility.

Why Ford is making these changes

These changes are intended, first and foremost, to make Ford's results more directly comparable with those of its rivals. From now on at the companywide level, Shanks said, Ford will focus on company EBIT, company EBIT margin, and operating cash flow.

The changes will also help investors see how much Ford is spending on its future-mobility and AV efforts, while excluding those costs from its automotive results. Hopefully, over time, they'll allow us to see exactly how profitable these new ventures become.