Automaker Ford weakens profit outlook amid price war, shares fall
Ford Motor said on Monday it expects to hit the lower end of its full-year profit guidance, dropping the company’s shares 5% in after-hours trading, as a price war hits the U.S. automaker’s bottom line.
Ford expects to earn about $10 billion in earnings before interest and taxes this year, down from its prior range of $10 billion to $12 billion.
“No doubt, there’s a global price war, and it’s fueled by over-capacity, a flood of new EV nameplates and massive compliance pressure,” CEO Jim Farley said on a call with analysts.
Rival General Motors beat Wall Street’s expectations when it reported third-quarter results last week and said profit next year looks similar to this year.
Ford has also been weighed down this year by high warranty costs and problems with its supply chain, worsened by recent hurricanes, Chief Financial Officer John Lawler said.
Third-quarter profit fell less than expected, however.
The company reported third-quarter net income of $900 million, or 22 cents per share, down from 30 cents a year ago. Results were hurt by a $1-billion charge it took on cancelling production of a three-row electric SUV in August.
“Ford and other domestic automakers are facing headwinds from still-elevated interest rates and well-above-average inventory levels, which is leading to an increase in incentives and other measures, which should eat into margins,” said CFRA Research analyst Garrett Nelson.
On an adjusted basis, Ford reported quarterly profit of 49 cents per share, compared to analysts’ average estimate of 47 cents, according to data compiled by LSEG.
Ford’s commercial and gas-engine divisions posted combined EBIT of about $3.4 billion, fueling the company’s profits amid steep EV losses. The company’s inventory was higher than its target range, as it ended the quarter with 91 days of gross stock and 68 days of dealer stock, Farley said.
Farley has made tough decisions about the company’s electric-vehicle lineup as competition from Tesla and Chinese automakers has intensified over the past year. Ford canceled the highly-anticipated three-row EV, which it dubbed a “personal bullet train,” saying the vehicle could no longer be profitable in the timeline required.
Company executives have said that new vehicles need to be profitable within 12 months of launch to make its battery-powered business sustainable.
Ford’s stock is down about 6% this year, falling less than Jeep-maker Stellantis’ 40% decline as the latter struggles with slowing sales and profits in North America and announces management shuffling.
The strongest of the Big Three this year has been GM. Its shares are up about 47% this year on consistently increased guidance.
EV LOSSES
Ford, one of the only legacy automakers to report its EV results separately, is facing around a $5-billion loss on its electric vehicles this year. It recorded a loss of $1.2 billion in EBIT in the third quarter on its EVs, bringing its losses on the segment for the first three quarters of 2024 to $3.7 billion.
The company said it made nearly $1 billion worth of cost improvements year-over-year, but these gains were largely offset by industry-wide pricing pressure.
Lawler said pricing pressure on EVs will remain intense at least until 2026 as automakers flood the market with new models.
“It’s going to be a very competitive market and that’s what we need to be prepared for,” Lawler said on a call with reporters.
Ford maintained its expectation to cut $2 billion of annual cost by year-end from materials, manufacturing and freight, as the automaker works to offset higher labor costs following a new agreement with the United Auto Workers union last year.
(Reporting by Nathan Gomes in Bengaluru; Editing by Anil D’Silva and Rod Nickel)
