Ford Motor Company Update

By Nora Eckert and Nathan Gomes
(Reuters)

Ford Motor announced on Monday that it expects to meet only the lower end of its full-year profit guidance, causing its shares to drop 5% in after-hours trading.

The company now forecasts earning about $10 billion in earnings before interest and taxes this year, down from the original range of $10 billion to $12 billion.

High warranty costs and supply chain issues, exacerbated by recent hurricanes, have burdened the automaker, according to Chief Financial Officer John Lawler. Additionally, increased competition from rivals producing affordable electric vehicles (EVs) has affected Ford's cost-reduction efforts.

Although third-quarter profits declined less than expected, the company reported a net income of $900 million, or 22 cents per share, down from 30 cents a year prior. This included a $1 billion charge for canceling the production of a three-row electric SUV in August.

CFRA Research analyst Garrett Nelson commented that domestic automakers, including Ford, face challenges from elevated interest rates and high inventory levels, leading to increased incentives that may erode profit margins.

On an adjusted basis, Ford's third-quarter profit was 49 cents per share, surpassing analysts' estimate of 47 cents.

Ford’s CEO Jim Farley has had to make difficult decisions regarding the company's EV lineup due to intensified competition from Tesla and Chinese manufacturers. The cancellation of a much-anticipated EV model was based on profitability concerns within the required timeline.

Ford's stock has declined about 6% this year but has performed better compared to Stellantis, whose stock has fallen by 40%. General Motors has outperformed with a share increase of approximately 47% this year.

EV Losses

Ford is anticipating a $5 billion loss on its EVs for the year, recording a $1.2 billion loss in EBIT for the third quarter alone. Despite achieving nearly $1 billion in cost improvements year-over-year, these gains have been largely offset by pricing pressures across the industry.

Lawler indicated that pricing pressures for EVs will likely persist until at least 2026 due to a saturated market with new models.

Ford is committed to cutting $2 billion in annual costs by year-end through improvements in materials, manufacturing, and freight, as it grapples with increased labor costs from a recent agreement with the United Auto Workers union.