Author: CNBC Online news

Ford shares jump after strong truck sales help third-quarter results beat expectations

Ford's shift of focus to trucks boosted its profitability, expert says
4:59 PM ET Wed, 24 Oct 2018 | 02:02

Ford shares surged on Wednesday after the automaker reported quarterly earnings and revenue that beat analysts' expectations.

Strong sales of trucks in North America helped offset declining sales of passenger cars, and challenges such as higher costs, lower volume, and difficulties in China. But earnings are still down from the same quarter last year.

Shares were up more than 4 percent in after-hours trading.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: 29 cents, adjusted, vs. 28 cents expectedAutomotive Revenue: $34.7 billion vs. $33.3 billion expected

The results come during a challenging time for the automaker, which is very much in the middle of a turnaround. Shares of Ford have fallen more than 30 percent since the beginning of the year. Materials costs have risen and tariffs have already cost the company at least $1 billion.

Ford said third-quarter net income fell to $1 billion, or 25 cents per share, from $1.6 billion, or 39 cents per share a year earlier. Excluding items, Ford earned 29 cents per share, beating the 28 cents per share expected by analysts surveyed by Refinitiv.

Total revenues rose nearly 3 percent to $37.6 billion. Its automotive revenue was $34.7 billion, ahead of the $33.3 billion analysts were expecting.

The second-largest U.S. automaker continues to benefit from a relentless consumer shift toward sport utility vehicles and trucks in North America, Ford's strongest market. Ford said its F-Series line of full-sized pickup trucks gained market share, and the Super Duty line of trucks saw record high transaction prices.

Ford beats earnings, revenue expectations
4:35 PM ET Wed, 24 Oct 2018 | 01:22

“The shift to trucks is really the driver to profitability and the margins,” said Kelley Blue Book senior managing editor Matt DeLorenzo said on CNBC's Closing Bell. “Ford is pretty well positioned right now with their current product mix. The car decision right now won't hurt them much in the short term. We'll have to see where the market goes in the longer term.”

But it lost market share in every region where it sells vehicles. It continues to struggle internationally, though it lost less money in those markets than it did in the second quarter.

Revenues were up in Europe by about $500 million over the same quarter last year, but were down in South America, the Middle East and Africa, and Asia.

The Ford Credit business had a strong quarter, the company said.

“This quarter shows that our business remains very strong in key areas,” said CEO Jim Hackett. “We continue to make progress on our efforts to redesign Ford to be more competitively fit, disciplined in capital allocations and nimble enough to win in a fast-changing world.”

Ford continues to back its prior forecast, which calls for adjusted full-year earnings of $1.30 to $1.50 per share. It said cash flow for the year will be positive, but lower than it was in 2017.

Previously, the company said it will spend $11 billion on restructuring, but some investors say Ford has not released enough details and is not giving the appearance that it is taking decisive action.For example, the company said on Oct. 5 it plans to make cuts to its salaried workforce of 70,000 people, but it does not yet know how many jobs are at risk and will share more details in the second quarter of 2019.

During a call with analysts, Hackett said he understands the frustration over the lack of clarity, but said Ford has to move cautiously. Although it may not be apparent to those outside the company, Ford has been making progress in formulating a turnaround plan.

Separately, Ford said it expects to continue to pay its regular dividend. Morgan Stanley analyst Adam Jonas recently downgraded the stock from a buy to neutral, and said Ford's cash flow is under pressure and its dividend may be at risk.

“We don't know how we've lost control of the way that has been projected, but we have been consistent, saying that we plan to pay the regular dividend in this five-year plan,” Hackett said.

Ford shares jump more than 8 percent on strong earnings and more details of its turnaround plans

Jeff Kowalsky | AFP | Getty Images
Jim Hackett, president and chief executive officer, Ford Motor stands outside the headquarters as they celebrate the production of the 10,000,000 Mustang on August 8, 2018 in Dearborn, Michigan.

Ford shares were up more than 8 percent Thursday after the company delivered better-than-expected earnings Wednesday night.

Investors seemed encouraged by CEO Jim Hackett's pledge to share more details of his plans to restructure the company and improve efficiency.

Ford is going to host several events in the “coming weeks and months” where it will share more information about Hackett's $11 billion turnaround plans. Hackett has spoken extensively of the need to improve the company's “fitness,” or efficiency, but investors have at times expressed frustration at what they say is a lack of clarity and transparency on Ford's part.

The automaker's shares have fallen roughly 30 percent since the beginning of the year.

“It seems that Mr. Hackett understands that the Street needs more information to gain comfort with his plan, and as such he hinted that there are a number of investor events planned for the near future,” said RBC analyst Joseph Spak in a note published Thursday.

Ford's third-quarter results were solid, despite the fact that some key metrics were down from the same quarter last year, analysts said. Strong sales of trucks in North America helped offset declining sales of passenger cars, higher materials costs and difficulties in China.

“The results really show an enhanced focus on North America, and a focus on trucks and SUVs,” CFRA analyst Garrett Nelson told CNBC. Nelson was surprised the automaker maintained its full-year earnings guidance of $1.30 to $1.50 per share, and said he expects earnings to come in at the low end of that range.

Ford still faces challenges on numerous fronts, including risks from rising materials costs, threats to both supplies and sales from new tariffs, and struggling international businesses.

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General Motors’ shares soar as strong truck sales, higher prices boost third-quarter profit

General Motors posts strong beats on top and bottom lines
8:37 AM ET Wed, 31 Oct 2018 | 01:42

General Motors said Wednesday it sold fewer vehicles during the third quarter — but at higher prices — helping the Detroit automaker deliver a better-than-expected earnings report that sent its shares soaring.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $1.87, adjusted, vs. $1.25 expected

Revenue: $35.79 billion vs. $34.85 billion expected

The carmaker's shares jumped by 6.3 percent in morning trading. During the premarket, it had gained 10 percent.

GM swung to a profit during the quarter from last year's loss, which stemmed from the company's sale of its European business to Groupe PSA. GM's net income was $2.5 billion, or $1.75 a share, compared with a loss of $2.98 billion, or $2.03 a share, a year ago. It generated $35.79 billion in revenue, up 6 percent from $33.62 billion during the same quarter last year. Analysts had expected the company to generate $34.85 billion during the third quarter.

“Our disciplined approach to the U.S. market, combined with strength in China and further growth of GM Financial, drove a very strong quarter,” said GM CFO Dhivya Suryadevara. “We will continue to take actions to mitigate headwinds including foreign currency volatility and commodity costs.”

Here's what's driving the growth in GM's North America sales: Analyst
2:54 PM ET Wed, 31 Oct 2018 | 03:37

Suryadevara said on a conference call that GM expects fourth quarter performance to be strong, with solid sales of highly profitable crew-cab trucks.

The company said it sold fewer cars but was able to raise its prices in the U.S. by an average of about $800 per vehicle to more than $36,000, setting a record for transaction prices and about $4,000 over the industry average. It also said Cadillac sales in China broke a record, up 4 percent over the previous year and 20 percent year to date.

GM's third-quarter vehicle sales volume dropped by 14.7 percent from the previous year, the company said. Sales fell across every region and every brand, with Cadillac seeing the smallest decline in sales among its marquee brands, 3.9 percent, from the previous year.

Sales of several Chevrolet and GMC truck models, including the Silverado LTZ and High Country and the GMC Sierra SLT, Denali and its new off-road AT4 crewcab models exceeded expectations, GM said. The automaker expects to ship about 120,000 of the new trucks in the second half of 2018.

The strength of GM's truck and SUV business in North America is further evidence of how important that market is to all three major U.S. automakers, who have been less successful abroad.

“North America is the best place to do business,” said CFRA analyst Garrett Nelson. “Looking at international operations, it is just a matter of who can tread water the best.”

Major automakers have been reporting higher material costs and other increased expenses stemming from the trade war, particularly between the United States and China.

That's been punctuated by signs of weak demand for new cars overall, particularly in North America. A recent estimate from industry tracker LMC Automotive said North American new vehicle sales are expected to fall in October from last year and face further pressure.

“Affordability may be the canary in the coal mine for the level of auto sales as we close out 2018 and begin to look at 2019. Transaction prices are still edging higher,” said Jeff Schuster, president, Americas operations and global vehicle forecasts at LMC Automotive.

The Federal Reserve is expected to raise interest rates again in December, followed by three more rate hikes in 2019, he said. Drivers are buying more used cars, in the meantime.

“This is a combination that could cause consumers to be squeezed out of the new-vehicle market, putting pressure on volume even if other fundamentals are favorable,” Schuster said.

GM's shares have fallen nearly 19 percent since the beginning of the year.

The auto cycle leaves plenty of room for Ford and GM to continue growing, analysts say

GM has best car lineup and CEO in history: Pro
3:49 PM ET Wed, 31 Oct 2018 | 04:26

There's still plenty of time in the auto cycle, and General Motors and Ford will continue to grow, Tigress Financial Partners CIO Ivan Feinseth said on CNBC Wednesday.

He told “Closing Bell” that at the trough of the auto cycle, the average age of a car is about 11 years old. At the peak, it is about 7 years old. This year, the average age of a car is about 10 years old.

“Auto sales, as far as an upgrade cycle or a necessity purchase cycle, have a long way to go,” Feinseth said.

“You also have people who buy new cars every three years because of the lease cycle, and also one of the biggest motivators of new car purchases is all of the infotainment and collision-avoidance features that are now available in new cars, so I think that the runway still has a ways to go for GM and Ford,” he added.

He said Ford has a lot of room to grow in the luxury market to compete with GM.

“Ford needs some redesign in a number of their vehicles and they need a bigger push in the luxury market,” Feinseth said, noting that Cadillac is the dominant American luxury car brand.

However, he thinks Ford is winning in pickup trucks and sports cars.

As for GM, it “has the best line-up it's ever had as far as vehicles in the company's history. They are led by one of the best CEOs in the company's history, so I think the wind is at their back,” Feinseth added.

Michael Ward, an auto analyst with Williams Research Partners, also thinks the auto cycle will go higher.

“In an environment where the unemployment rate is low, confidence is high, interest rates at an all-time low and income growing, you're not going to have lower car sales,” Ward said on “Power Lunch” Wednesday.

“You might be down 1 percent; that's because the industry is not goosing them up with incentives. I think you're probably going to see industry sales at 17 million units each in the next two or three years, and to me, that's what the market is missing,” he added. “That will enable companies like General Motors and Ford and the suppliers and dealers to generate record profitability.”

He also said electric cars will be key in growth.

“Electrified vehicles include hybrids,” Ward said. “That is where you're going to see the most growth because they can be in trucks, they can be in cars, they can be in every sized vehicle. Fully electric vehicles are still going to be a very small portion of the market, 1-2 percent at most in the next five to 10 years.”

Here's what's driving the growth in GM's North America sales: Analyst
2:54 PM ET Wed, 31 Oct 2018 | 03:37

Tesla expects to invest up to $6 billion over next two years in factories and equipment

David Butow | Corbis | Getty Images
Workers assemble cars on the line at the Tesla's factory in Fremont, California.

Tesla expects to spend up to $6 billion on factories and equipment over the next two years as it ramps up production and develops new vehicles, the company said in a regulatory filing Friday.

The electric car maker said it expects to spend just under $2.5 billion in capital investments for 2018 and $2.5 billion to $3 billion annually over the next two years.

Tesla is also planning to build a factory in China, which it is calling Gigafactory 3, where it hopes to eventually produce 3,000 of its popular Model 3 sedans a week. The filing cautioned that the time frame on its production targets was “subject to a number of uncertainties, including regulatory approval, supply chain constraints, and the pace of bringing the factory online.”

Gigafactory 1 is the company's plant near Clark, Nevada, where it makes batteries and parts of the Model 3 drive train. Gigafactory 2 is its solar power plant in Buffalo, New York.

Tesla is planning to start producing Model 3s in Shanghai to reduce the impact of tariffs. Because Tesla currently exports all of its vehicles to China, it has been hurt by stiff tariffs, some of which result from the trade war between China and the U.S.

Shares of Tesla were flat Friday morning.

In the filing, the company also revealed that the Justice Department and SEC are investigating Model 3 production targets.

The company has been burning through cash as it ramps up production and deliveries of its Model 3 midsize sedan, and it has big plans for the years ahead. Tesla unveiled an electric semi-truck last year but has not said much since then about when and how the company will produce the vehicles.

It is also planning a crossover sport utility vehicle called the Model Y, and a second-generation version of the Tesla Roadster that CEO Elon Musk has said will be quicker and faster than any other car on the road. Musk has also talked about his desire to make a pickup truck.

It also is attempting to build a business in rooftop solar power systems. In 2016, Musk revealed a planned roof tile that could collect solar power, but the company has so far shipped only a few systems.

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Elon Musk says Tesla ‘probably would not’ take money from Saudi Arabia now

Elon Musk says he probably wouldn't take Saudi money
8:23 AM ET Fri, 2 Nov 2018 | 00:53

Tesla “probably would not” take money from Saudi Arabia in the wake of the death of Saudi journalist Jamal Khashoggi, Chief Executive Elon Musk said.

Musk and his electric car manufacturer hit headlines in August after the billionaire put out a tweet sayingthat he was considering taking the firm private at $420 per share.

Later explaining his tweet in a blog post, Tesla's boss said he had been approached by Saudi Arabia's sovereign wealth fund “multiple times” about the prospect of taking Tesla private, and that it has bought a nearly 5 percent stake in Tesla through the public market. Plans for a take-private deal were subsequently shelved.

In an interview with Recode's Kara Swisher, which was published early Friday morning, Musk was asked directly about his thoughts on the death of Khashoggi, an outspoken critic of the Saudi regime.

“Yeah, I mean, that sounds pretty bad. So … that is not good. That is bad,” he said.

Asked whether he would accept Saudi money now, following Khashoggi's death, Musk said: “I think we probably would not.”

Saudi Arabia's public prosecutor last week acknowledged for the first time that Khashoggi's killing at the Saudi consulate in Istanbul, Turkey was “premeditated,” deviating from previous claims that his death was unintended.

The Arab kingdom initially denied any involvement in his disappearance, saying the Washington Post journalist had left the consulate unharmed. Saudi Crown Prince Mohammed bin Salman has said he is cooperating with Turkey over Khashoggi's killing, and that those found guilty will be brought to justice.

Musk, asked about the influence of the Saudi sovereign wealth fund in Silicon Valley, added that it was important to recognize that not all Saudi cash is the same.

He said: “I think we should just consider that there is a whole country, and there's, you know … There are a lot of good people in Saudi Arabia, and Saudis who are outside of Saudi Arabia. So I think you cannot paint an entire country with one brush.”

Saudi Arabia's Public Investment Fund (PIF) is a major backer of SoftBank's $100 billion Vision Fund, which has been ploughing cash into Silicon Valley's start-up economy. The PIF has already committed $45 billion to the fund, and Saudi Arabia's crown prince said last month the PIF plans to invest another $45 billion into the Japanese firm's second major fund.

The relationship between SoftBank and Saudi Arabia appears to have become increasingly uncertain, however, following the controversy surrounding Khashoggi. Masayoshi Son, the firm's chief executive, reportedly backed out of the country's high-profile Future Investment Initiative business conference last month.

Various other tech executives withdrew from the investment conference, including Uber's Dara Khosrowshahi, Google's Diane Greene and Simon Segars of Arm Holdings — which is fully owned by SoftBank.

GM CEO Barra says the automaker is watching China trade ‘very carefully’

General Motors Chairman & CEO Mary Barra (L) and President of General Motors China Matt Tsien attend a press conference in Shanghai, China September 15, 2017.

General Motors is keeping a close eye on China, CEO Mary Barra said Wednesday.

GM said its luxury brand Cadillac had record sales in China despite an ongoing trade war that's raised prices on steel and aluminum as well as on the vehicles themselves.

“We're watching it carefully and we're very hopeful that both sides will have dialogue and get to the table to work through some very important issues that both China and the United States have as it relates to trade,” Barra told analysts on a conference call Wednesday discussing GM's third-quarter earnings. “When we look at our positioning, we have many levers that we can pull to continue to have strong performance in China.”

While Ford and other automakers have reported trouble in China for the third quarter, it was a bright spot for GM.

The company reported record third-quarter “equity income” in the country, led by a 4 percent increase in Cadillac sales there. GM uses equity income to measure its performance in the region since the company follows the standard industry practice of selling its vehicles through a joint venture with Chinese manufacturer SAIC. Each company owns a 50 percent stake in the venture.

Barra told analysts the partnership has served GM well.

“I think we have the strongest partner in China with SAIC,” she said.

“At this time we are not looking to change the 50-50 structure,” Barra added. “It has served us well, and I think the strength of our results demonstrate that.”

But at the same time, sales in the country were down 15 percent over the same quarter last year, and there are signs of trouble in the region. A recent report from Bloomberg said the Chinese government is considering a cut to taxes on auto purchases to revive flagging sales.

GM said it was able to charge more for cars during the quarter and the declines came from less its profitable segments. It also said that sales of its luxury vehicles were up.

GM to offer buyout to some workers in cost-cutting move: DJ

GM offering buyouts to salaried employees
29 Mins Ago | 01:32

General Motors is offering buyouts to salaried workers to help cut costs, Dow Jones reported Wednesday. About 18,000 employees are eligible.

The company said it is making the move now to take advantage of the strong economy and its own healthy performance. The largest U.S. automaker reported better than expected earnings on Wednesday, fueled by strong sales of trucks and crossovers in North America.

GM was not immediately available for comment.

The automaker is making the cuts in response to rising commodity costs, said CFRA analyst Garrett Nelson. The hope is enough workers take the buyouts, the automaker will not have to resort to layoffs.

GM's U.S. rival Ford said in early October it plans to thin the ranks of its salaried workforce by the second quarter of next year.

Ford and Baidu team up to test self-driving vehicles in China

Nelson Ching | Bloomberg | Getty Images
Robin Li, chief executive officer of Baidu Inc.

Ford and Chinese internet giant Baidu announced a tie-up Wednesday that will see the two firms jointly test self-driving vehicles in China for two years.

The initiative will see the two companies collaborate on the development and testing of driverless vehicles that meet the Level 4 standard set by U.S. industry organization SAE International. This means that autonomous vehicles developed by the two will not require intervention from a human driver.

Ford and Baidu did not disclose any financial terms or ownership structure details of the venture.

“Working with a leading tech partner like Baidu allows us to leverage new opportunities in China to offer innovative solutions that improve safety, convenience and the overall mobility experience,” Sherif Marakby, president and CEO of Ford's autonomous vehicles unit, said in a statement Wednesday.

“This project marks a new milestone in the partnership between Ford and Baidu, and supports Ford's vision to design smart vehicles that transform how we get around.”

Ford's autonomous vehicles have already been fitted with Baidu's autonomous driving system Apollo, the two companies said in a joint statement. On-road testing of the driverless vehicles developed by Ford and Baidu is slated to start by the end of this year.

“Baidu and Ford both believe in using technology to redefine the future of mobility,” Zhenyu Li, vice president and general manager of Baidu's intelligent driving group, said in a statement.

“This project will combine our leading-edge technological know-how and understanding of China together with Ford's vehicle expertise, marking a significant step forward towards Baidu's goal of developing autonomous driving vehicles that will greatly benefit future consumers.”

The news follows an initial announcement made in June that the two companies would explore areas of cooperation in the fields of artificial intelligence and connectivity.

Baidu was recently added to the Partnership on AI (PAI), a U.S. ethics body devoted to establishing best practices for AI and educating society about the technology. It was the first Chinese firm to join the organization.

It has upped the competitive pressure on U.S. rivals that are ploughing significant money and resources into AI — including Google and Microsoft — and recently developed a tool which it says can translate different languages in real time.