Ford Motor Co., the 119-year-old automaker based in Dearborn, reported third-quarter earnings Wednesday that reflected hard hits caused by increasing supplier costs along with exiting its investment in the Argo AI autonomous driving technology company. Argo will “wind down” its operations as Ford plans to absorb engineers and developers while also utilizing Argo facilities, Ford told reporters. Details are still unfolding.
Financial results
Ford Q3 reports included:
- $1.8 billion in earnings before interest and taxes — adjusted EBIT — down from $3 billion
- $32 billion in cash on hand and $49 billion in liquidity
- $827 million net loss, a result of special items, down from a net income of $1.8 billion a year ago
- $39.4 billion in revenue compared with $36 billion in 2021
- $1.3 billion in earnings before interest and taxes at Ford, North America, down 46% from the same period in 2021
- $193 million loss in China compared with a loss of $39 million third quarter last year.
- $599 million in earnings before interest and taxes for Ford Credit, down from $1.1 billion from a year ago.
What special costs?
Ford said in its news release that the company “concluded” the industry’s advanced driver assistance systems would take longer than expected to commercialize so the company made a “strategic decision” to shift its spending from Argo AI to internal developments. Profitable, fully autonomous vehicles are a long way off, Chief Financial Officer John Lawler said.
“Argo AI had been unable to attract new investors,” Ford said. So, the automaker recorded a $2.7 billion noncash, pretax impairment on its investment in Argo AI, resulting in an $827 million net loss for the third quarter.
Also, supply shortages left “about 40,000 ‘vehicles on wheels’ — built, but awaiting needed parts — in inventory atthe end of September” and about $1 billion in higher-than-expected supplier payments, Ford said.
“The results could’ve been better,” Lawler told reporters. But “our balance sheet is in very good shape.”
Stock on the company valued at $51.54 billion closed at $12.82 a share, between the 52-week low of $10.61 and high of $25.87.
What worked
Ford continues to see its transaction prices climb while incentives sought by bargain hunters dropped. Buyers spent an average of $54,008 per vehicle compared with $40,000 in 2017, according to Cox Automotive.
At the same time, the company cut its average cost reduction to $929 while the industry averaged $1,079. Note: General Motors shoppers averaged $1,353 in incentives.
While car buyers overall spent an average of $48,094 per vehicle in the third quarter, Ford brand shoppers spent $53,512, according to Kelley Blue Book. Only the small Maverick pickup saw its transaction price dip, down 1% to $29,560 from 2021, Cox Automotive noted. However, the data compared just 506 mostly high-end pickups sold just after its launch a year ago to 13,049 Mavericks this third quarter. The company has told customers the Maverick wait could be up to a year.
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Pre-ordering vehicles also cuts costs for the company and car dealers, because vehicles aren’t just sitting on lots. They’re sold, built and delivered. Ford CEO Jim Farley credits the approach adopted during the pandemic as helping the bottom line significantly.
Big moneymakers
While car prices go up throughout the industry, Cox Automotive has noted that Ford has seen especially big spikes on average transaction prices from just a year ago across brands:
- Expedition SUV up 9% to $74,477
- Transit van, up 14% to $50,767
- Mustang Mach-E up 8% to $59,085
- Bronco up 8% to $53,866
- F-Series pickup trucks up 7% to $63,866
- Lincoln Nautilus SUV up 5% to $56,786
- Lincoln Corsair entry-level model up 2% to $47,436
- Navigator up 7% to $101,218
EV market numbers
Ford saw its sales of electric vehicles grow to 18,257 from 5,880 during third quarter a year ago.
And the company is building the F-150 Lightning as fast as production capability allows.
Year to date, Ford has sold 41,236 electric vehicles, up from 18,855 in 2021.
Where things can improve
Ford has said it’s building as quickly as production allows. Order banks are full and shut down. Customers are waiting, some patiently and some not so patiently. Managing customer expectations is essential to the process. Reducing warranty costs and recall costs and lawsuits continues to be a challenge for Ford.
Industry analyst weighs in
While September sales dropped 9% from 2021, the ability to get more cars, including its popular new models, shipped to dealers and into the hands of buyers really helped the earnings situation.
“Upshot is, in the U.S., its most important market, Ford had better inventory and thus improved sales in Q3, despite a down September,” said Michelle Krebs, executive analyst for Cox Automotive. “Ford’s new models did particularly well, including its electrified ones.”
Investors watch closely
Ford had forecast adjusted earnings before income and taxes of $1.4 billion to $1.7 billion for the third quarter. Ford said parts costs would be $1 billion higher than expected because of inflation and parts shortages, Cox Automotive said Wednesday. “Those shortages caused up to 45,000 vehicles, mostly high-margin SUVs and trucks, to remain parked awaiting a variety of parts, from computer chips to even the Blue Oval badges.”
Wall Street expected a quarterly operating profit of about $1.8 billion on vehicle sales of $36.4 billion compared with $2.9 billion on sales of $38 billion in the second quarter, according to Barron’s.
Detroit Three
General Motors reported third quarter earnings Tuesday with $41.89 billion in revenue and an adjusted net income of $4.3 billion, up from $2.9 billion in 2021. GM reported a net income of $3.3 billion, up from $2.4 billion in the year-ago period. Its adjusted earnings before interest and taxes was $4.3 billion, up from $3 billion. Stellantis reports its data on Nov. 3.
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Contact Phoebe Wall Howard: 313-618-1034 or phoward@freepress.com. Follow her on Twitter @phoebesaid
