Ford’s profits exceed commercial sales; EVs still drag

DETROIT/BENGALURU – Ford Motor posted first-quarter earnings April 24 that beat Wall Street expectations, boosted by strong performance in its commercial vehicle division and an increase in sales of hybrid vehicles.

The company said it expects to achieve the higher end of its expected annual guidance of US$10 billion ($13.62 billion) to US$12 billion in earnings before interest and taxes. Ford shares rose more than 3 percent in aftermarket trading on the news. Still, Ford is struggling with what CEO Jim Farley called “a huge barrier not just for Ford, but for our entire industry”: electric vehicle production.

The automaker posted an operating loss of $1.3 billion for its EV and software division in the first quarter. More broadly, executives expect this part of the business to post a pre-tax loss of between $5 billion and $5.5 billion this year.

In the near term, hybrids are a top priority for Ford to deliver a battery-powered future to customers, and the auto company aims to increase hybrid sales by 40 percent by 2024 and quadruple them in the coming years.

Mr. Farley said he has dialed back some of Ford’s EV ambitions to better meet consumer demand. In April, Ford postponed planned launches of three-row electric vehicles in Canada and its next-generation electric pickup built in Tennessee. Executives have said they will not launch Ford’s next generation of electric vehicles until they can be profitable.

The EV business has proven tough not only for older automakers like Ford, but also for pure EV players like Tesla.

Elon Musk’s company recently laid off 10 percent of its global workforce and on April 23 posted its first quarterly revenue decline since the pandemic.

Continuous march downwards

Ford expects electric vehicle production costs to decline, but will be largely offset by intense pricing pressure from industry competitors, Chief Financial Officer John Lawler said.

“Over the last 12 to 18 months there has been a continued decline on the revenue line, which is offsetting the savings we have made from a cost perspective,” he said of the EV business.

Ford is also shifting focus to producing larger electric trucks and SUVs, as well as affordable and smaller electric vehicles being developed by a “skunkworks” team in California.

The company posted a rare 13 percent decline in quarterly sales for its gas engine business, which the company blamed on the launch of the new F-150 pickup.

The automaker will likely have slower, more deliberate launches in the future as it tries to root out costly quality problems, executives said.

The Dearborn, Mich., automaker’s strong commercial operations continue to drive bottom line, and the company is betting on software-related services in this division to grow profits in the coming years. That unit had an operating profit margin of almost 17 percent in the quarter.

Ford posted adjusted quarterly profit of 49 cents per share for the quarter ended March 31, compared with 63 cents per share a year earlier.

Analysts on average expected Ford to report adjusted earnings of 40 cents per share, according to LSEG data.

General Motors reported quarterly results on April 23 that beat Wall Street targets and the automaker raised its full-year forecast, citing stable prices and demand for gasoline-powered vehicles.

Some analysts sounded a cautious note about the broader economic environment in which Ford and other automakers operate.

“With auto inventories now at much higher levels and a higher and longer interest rate scenario unfolding, we expect new car prices to remain under pressure and incentives to continue to rise,” said CFRA Research analyst Garrett Nelson in a research note. REUTERS