Luckily the F150 is that big. For decades, the so-called ‘full-size’ pickup has been number 1 in US registration statistics and leaves ford look like a successful car manufacturer. But in its shadow things have been looking bleak for a long time: beyond the cheap commercial vehicle, the brand lacks real bestsellers, especially in the high-margin area, both in the USA and in the rest of the world.
The SUV Explorer: Rear Toyota, honda, Tesla, Jeep and Chevy, and shaken by recall campaigns. The sedan segment: completely abandoned. The European offer: concentrated on the compact car Focus, a few SUVs and the bestseller Transit, also a low-margin commercial vehicle.
It’s been a long time since Ford was the cheap but respectable brand for the masses.
On Friday night, CEO Jim Farley (60) announced business figures for the past year in Detroit and almost let his disappointment run wild: “We have deep-rooted problems in our industrial system,” he said, adding: “That was humiliating for both me and my team.” The group left “about two billion dollars in profit on the table”.
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Costs too high, quality too low
Ford missed its own already low target of $11.5 billion in adjusted operating income by about 10 percent, coming in at just $10.4 billion. The development in the final quarter in particular was negative and was disappointing in direct comparison to the competition General Motors. The number one in the USA had shone with an increase in operating profit in the fourth quarter and surprised analysts with an optimistic outlook. Ford stock tumbled more than 5 percent on Friday.
As a consequence, CFO John Lawler announced “very aggressive” measures to reduce production and supply chain costs that go well beyond those already known. “Everything is on the table.” Layoffs and plant closures could be part of it. “We have opportunities in material costs. We have opportunities in manufacturing. We have opportunities throughout our supply chain. It’s really about the industrial platform and part of that will be productivity,” he said. There are also ways to reduce complexity.
Lawler avoided any statement about specific measures or specific savings targets. At the same time, he made it clear that the savings programs already known, such as those in Europe, were no longer sufficient six months after they were announced. “There’s more work to do in Europe. There’s more work to do in China. We have work to do here in the US,” Lawler said. “Our cost structure is not competitive and our quality is not where it should be.”
Downward spiral in Europe, write-downs on Argo AI
Like GM, Ford is in the middle of a complete conversion to an electric car manufacturer and is investing billions. The company announced last March that To separate business for combustion engines and electric cars in the future. However, it always suffers setbacks. That together with Volkswagen The robot car project Argo AI that was started was surprisingly completely closed last year and burdened the balance sheets of both groups with write-downs in the billions.
For cost reasons, new compact models in Europe should only be based on VW’s electric car platform in the next few years, with all the disadvantages for brand profile and added value. The plant in Cologne is currently being converted for the construction of electric cars. Ford is largely giving up its own development in Europe. Up to 3200 jobs will be cut here. The factory in Saarlouis is to be closed or sold after the end of production of the Focus 2025; recently there were talks with the Chinese electric car manufacturer Build Your Dream (BYD).
The European business, which has been successful for decades, has fallen into a downward spiral between a shrinking market and an increasingly unattractive range of models, which now makes everything seem possible: In the fourth quarter of 2022, the pre-tax loss here doubled compared to the previous year to $400 million with unchanged sales.
CEO Farley is not uninvolved. From 2015 to 2017 he was head of Europe, until 2019 he was responsible for all international business. GM withdrew from Europe years ago and the daughter Opel sold to the later Stellantis group.
Image correction using Formula 1
At the same time, quality issues continue to weigh on Ford’s results. CFO Lawler said the company should be able to reduce warranty costs by $2 billion annually. Currently, however, it looks as if more costs could come to Ford: The US agency for road and vehicle safety NHTSA recently initiated a review of more than 1.8 million Ford Explorer vehicles. On the SUV built between 2011 and 2019, parts of the windshield trim could come loose at higher speeds.
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In addition, there is a risk of a price drop at Ford’s flagship future car, the Mustang Mach-E. After Tesla’s massive price cuts, Ford lowered prices by up to $5,900 and offered cheaper financing despite rising interest rates.
A partnership with Formula 1 world champion Red Bull, who is presenting his new RB19 in New York this Friday, should now help. The racing class is currently experiencing a boom worldwide, but especially in the USA. The American racing great Michael Andretti (60) is pushing into the starting field with the GM brand Cadillac. Thanks to great successes in the 60s and 70s, Ford is still the third most successful Formula 1 engine manufacturer behind Ferrari and Mercedes with a total of 176 Grand Prix victories.
However, it will only start in three years, 2026. Until then, Ford must continue to try to hide behind the F150. Last year, with a great deal of fanfare, he got the electric version Lightning, which achieved a small respectable success in terms of sales. The pickup is still under pressure. In 2022 alone, sales fell by ten percent.