FORD Motor posted first-quarter earnings on Wednesday (Apr 24) that beat Wall Street’s expectations, bolstered by a strong performance in its commercial vehicle division and an increase in its hybrid vehicle sales.
The company said it expects to achieve the higher end of its projected annual guidance of US$10 billion to US$12 billion in earnings before interest and taxes. Ford shares rose more than 3 per cent in after-market trading on the news. Still, Ford is grappling with what CEO Jim Farley called “a huge drag not just on Ford, but on our whole industry”: electric vehicle (EV) production.
The carmaker recorded a US$1.3 billion operating loss for its EV and software division in the first quarter. More broadly, executives expect this section of the company to sustain a pre-tax loss of between US$5 billion to US$5.5 billion for the year.
In the near term, hybrids are a top priority for Ford to ease customers into a battery-powered future, and the auto company aims to increase hybrid sales by 40 per cent this year and quadruple them in the coming years.
Farley said he has walked back some of the Ford’s EV ambitions to better match consumer demand. This month, Ford delayed the planned launches of three-row EVs in Canada and its next-generation electric pickup truck built in Tennessee. Executives have said they will not launch the next generation of Ford’s EVs until they can be profitable.
The EV business has proven tough not just for legacy automakers such as Ford, but also for pure EV players such as Tesla.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Elon Musk’s company recently laid off 10 per cent of its global workforce and on Tuesday posted the first decrease in quarterly revenue since the pandemic.
Ford expects EV production costs to come down, but to be largely offset by intense pricing pressure from industry competitors, said chief financial officer John Lawler.
“The last 12 to 18 months, it’s just been a continuous march down on the top line, which is offsetting any of the savings we have had from a cost standpoint,” he said of the EV business.
Ford is also shifting focus to producing larger electric trucks and SUVs, as well as affordable and smaller EVs that are being developed by a “skunkworks” team in California.
The company posted a rare 13 per cent drop in quarterly revenue for its gas-engine business, which the company blamed on the launch of the new F-150 pickup truck.
The automaker will likely have slower, more deliberate launches in the future in its effort to root out costly quality issues, executives said.
The Dearborn, Michigan, automaker’s strong commercial business continues to fuel its bottom line, and the company is betting on software-related services in this division to drive profits in the coming years. That unit had operating profit margins of almost 17 per cent in the quarter.
Ford posted quarterly adjusted earnings of 49 US cents per share for the quarter ended Mar 31, compared with 63 US cents per share a year earlier.
Analysts, on average, expected Ford to report an adjusted profit of 40 US cents per share, according to LSEG data.
General Motors on Tuesday reported quarterly results that topped Wall Street targets and the automaker raised its annual forecast, citing stable pricing and demand for petrol-engine vehicles.
Some analysts sounded a note of caution on the broader economic environment in which Ford and other automakers are operating.
“With auto inventories now at much higher levels and a higher-for-longer interest rate scenario unfolding, we expect new vehicle prices to remain under pressure and incentives to continue increasing,” CFRA Research analyst Garrett Nelson said. REUTERS