It wasn’t expected to be a good quarter for Ford Motor Co. Even then, the automaker’s second-quarter earnings managed to fall short of Wall Street’s expectations. That sent Ford shares tumbling by 11%, even though company leaders tried to assure investors they’re “on track” to deliver a full-year profit. More from Headlight.News.
Ford is a “completely different company” from what it was before the Ford+ plan was announced three years ago, said CEO Jim Farley.
Ford delivered $1.8 billion in net income for the second quarter of 2024, down 5.3% year-over-year. A variety of factors caught blame, including increased warranty costs and the company’s continued problems turning a profit on its battery-electric vehicles.
The numbers weren’t all disappointing. Ford actually beat revenue forecasts for the quarter, at $47.8 billion handily outperforming expectations of $44.02 billion in revenue. But earnings-per-share came in at a weak 46 cents, analysts forecasting 68 cents, based on a consensus figure culled by Yahoo Finance.
While far from wholesale panic, many investors walked away, sending Ford shares dipping as much as 12% in after-hours trading following the release of the earnings report.
Farley accentuates the positive.
Ford has faced a number of issues with recalls and other repairs, though it scored a big jump in the most recent J.D. Power Initial Quality Study.
From Ford’s perspective, the April-June quarter should be seen in positive light, the automaker issuing a statement noting it was the best-selling brand in the U.S. with its gas-powered vehicles, second only to Tesla in terms of EVs, and third in terms of hybrid sales.
“Ford+ is on track, our underlying quality is improving, and Ford Pro is showing the huge upside we’ve got in all our businesses,” Ford CEO Jim Farley said in a statement. “Transparency and accountability from having separate teams focused on the needs of different customers are leading to better decisions and greater value for everyone.”
Electrifying news
Ford has been a big proponent of the shift to battery-electric vehicles. But it has more recently pulled back on its plans, delaying billions of dollars of investment, reducing battery production and putting some new all-electric models on hold. A plant set to go all-electric in Ontario will instead be used to boost production of the F-Series pickups. A key shift in plans sees Ford now focused on affordable offerings, rather than high-priced models.
Sales of the Mach-E have surged since Ford cut prices earlier this year.
The challenge will be to make them profitable, especially considering that the automaker currently loses tens of thousands of dollars on each Mustang Mach-E and F-150 Lightning it builds. But it’s hoping that it can reverse that by boosting scale. And volumes, particularly with the Mach-E, have risen sharply since the automaker cut prices earlier this year.
Farley has signaled that the company will take a “more realistic and sharpened” approach to electrification, especially EVs. And that means more hybrids and plug-in hybrids.
But Ford’s conventional business – its internal combustion and hybrid vehicle operations dubbed Ford Blue – had their own problems for the quarter, operating income dipping 49% for the quarter to $1.171 billion. Its annual outlook was reduced from $6.5 billion to $6 billion for the full year.
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Quality concerns
Even before Farley was named CEO, addressing quality concerns was one of his most vexing challenges. And that was underscored by the most recent quarterly numbers, warranty costs one of the primary reasons for the decline in income at Ford Blue.
In June, the automaker recalled 550,000 F-150s which could unexpectedly downshift to first gear. A month earlier, it called back 450,000 SUVs and pickup trucks because they could unexpectedly lose power. In April, 43,000 SUVs were recalled due to potential fire risk. And other products have simply experienced higher-than-expected warranty issues.
During a conference call with analysts and reporters Wednesday afternoon, Chief Financial Officer John Lawler insisted Ford is making progress on recent models, blaming the latest warranty and recall hit on models released from the 2021 model year and before.
In a positive development, Ford said itself climbing to number 9 on the annual J.D. Power Initial Quality Study released last month, a jump of 14 spots. It previously had been ranked below industry average.
A cautious outlook
Ford CFO John Lawler says doesn’t see much likely to change for Ford’s financial picture during the rest of the year.
During the earnings call, Farley insisted the Ford+ plan is on track, but while he said the company should begin seeing improved profitability he declined to upgrade its forecast for the rest of the year – in contrast to what rival General Motors did earlier this week.
Lawler added that “We don’t see the second half being much different than the first half.”
Since taking the reins as CEO in October 2020, following an executive shake-up, Farley has promised to transform the second-largest Detroit automaker. Among his many moves, he ordered the company divided into three distinct units: the conventionally focused Ford Blue Oval, the EV division Ford Model e, and Ford Pro which produces commercial products such as the all-electric Transit van.
“We are absolutely a different company than we were three years ago,” Farley said, but he emphasized that “the remaking of Ford is not without growing pains.”
Ford should:
– Drop Lincoln (looooong overdue)
– Get out of Europe (with their re-badged VWs), Australia, SA
– Clean house at WHQ