Ford profits disappoint, stock falls 11% as quality issues dog automaker By Reuters
By Nora Eckert, Nathan Gomes
(Reuters) – Ford Motor reported a drop in second-quarter adjusted profit on Wednesday as the automaker continued to grapple with costly quality problems and a struggling EV business, sending shares down 11% in after-hours trading.
The Detroit automaker earned adjusted earnings of 47 cents per share, missing analysts' expectations of 68 cents, according to LSEG data.
Management emphasized that Ford (NYSE: ) continues to eliminate structural inefficiencies and transform its gas engine and EV operations, but Wall Street was not convinced.
“You said that Ford is a different company than it was three years ago, but the stock market doesn't seem to agree with you on that,” Morgan Stanley analyst Adam Jonas told Ford CEO Jim Farley at the company's conference call. call.
Ford's CEO has made fixing the company's quality problems a top priority since taking over in October 2020. Since then, Ford has hired a new quality director and changed some of its manufacturing methods to avoid defects, but they are still industry leaders. with the amount of recall.
Warranty costs increased by $800 million in the second quarter compared to the previous quarter, Ford Finance CEO John Lawler told reporters. Lawler said most of these warranty costs relate to older vehicles introduced in 2021 or earlier. He said field service activities this quarter are one-time cost increases for older vehicles and Ford expects the second half of the year to be in line with expected warranty costs.
The automaker maintained its annual guidance of about $10 billion to $12 billion in earnings before interest and taxes.
'GROWING PAIN'
“We can't study this quarter as the year is coming to an end, right,” said Lawler. “We are very confident about where we are this year. The plan is working. This transition will not be a straight line. We will have bumps as we restructure.”
Automakers have scaled back their EV ambitions amid downsizing demand, a shift to hybrids and stiff competition from Tesla (NASDAQ: ) and Chinese EV makers in global markets.
Earlier this month, Ford changed plans for a Canadian assembly plant that was expected to build a three-row EV, instead saying it will produce Ford's flagship F-150 pickup. Farley said the company is struggling to meet the growing demand from gas consumers.
“Overall, this EV journey has been easy, but it has forced us to be stronger as a company, including using it in our (traditional engine) business, which will bear fruit in the long run,” said Farley. . “Ford's restructuring is not without growing pains.”
On the battery front, Farley is focused on the company's efforts to expand its global portfolio by 40% this year and to develop a platform for a series of low-cost small electric vehicles, which California-based Ford is making. “skunk works” group.
Ford recorded an operating loss of $1.1 billion in its electric vehicle and software division in the second quarter, adding to its $1.3 billion loss from the first quarter. Management expects this division of the company to continue to post pretax losses of up to $5.5 billion annually.
'LOST PATIENCE'
The company's repeated messages to eliminate structural costs are falling flat on Wall Street.
“Investors may be losing patience with this story despite management's insistence that it lays the groundwork for profitable, long-term growth,” CFRA Research analyst Garrett Nelson wrote.
Meanwhile, Ford's commercial vehicle business, which Farley called its “secret weapon,” continued to drive the company's overall profits. The division posted operating profit of $2.6 billion for the quarter and operating margins of 15%.
Crosstown rival General Motors (NYSE: ) reported second-quarter profit and revenue on Tuesday that beat Wall Street expectations, boosted by strong prices and demand for gas-powered trucks. The company raised its annual forecast for the second time this year. Still, its stock fell nearly 6% on Tuesday, due to analysts' concerns that the auto industry's slowdown may not last long.
