Ford Motor Co. on Wednesday reported net income of $ 1.8 billion for the third quarter of the year, down $ 0.6 billion from the same quarter last year.
Ford is “competing as a challenger,” John Lawler, the automaker’s chief financial officer, told reporters on Wednesday.
Ford’s profit in the quarter before interest and taxes – Adjusted EBIT – was $ 3 billion, down $ 0.7 billion from the same period in 2020 and $ 1.8 billion higher than in 2019. EBIT does not include restructuring and other charges.
“We’re gaining more and more traction,” Lawler said, explaining that the company is better managing the chip sourcing challenges that he says could last until 2023, but with less “reach and severity” .
Ford CEO Jim Farley told Wall Street analysts on Wednesday that the latest performance results are a by-product of intense focus and discipline.
“We have a plan …” he said. “We’re out of time.”
Breaking production constraints is the key to future success, Farley said.
Farley and Lawler, who started as a team on October 1, 2020, have seen the automaker’s stock price more than double in the past year – despite the semiconductor chip shortage that has slowed delivery of everything from F-150 to the all-electric Mustang Mach-E, a recall of the Mach-E for loose windshields and panoramic roof windows that can come loose, and a recall of its all-new Ford Bronco to repair faulty hard tops .
Ford stock closed at $ 15.52 on Wednesday. After the third quarter 2020 earnings announcement, the stock closed at $ 7.70.
Big news for investors, Lawler revealed that the company will return dividends to its shareholders in the fourth quarter at a cost of around $ 400 million.
“I think what you are seeing is the confidence we have in the traction of the business and the trajectory of the business,” Lawler told reporters, noting “incredible demand” for Ford products.
“We are not capital constrained. We have $ 31.5 billion in cash,” he said. “We can fund all of our growth initiatives.”
Ford ended the quarter with $ 31.5 billion in cash and more than $ 47.4 billion in cash.
A year ago, Ford had $ 30 billion in cash and $ 45 billion in cash.
Ford Credit reported a profit of $ 1.1 billion, the same as in the third quarter of 2020.
For the first three quarters of the year, Ford’s net income of $ 5.7 billion is up from $ 1.5 billion in the first three quarters of 2020.
And third-quarter revenue was $ 36 billion, up from $ 38 billion in 2020.
The company raised its EBIT guidance for the full year, estimating 2021 profits to $ 10.5 billion to $ 11.5 billion from previous guidance of $ 9 billion to $ 10 billion.
Ford is eager to remove its vehicles from their bundles and deliver them to consumers, Lawler said. He predicted to reduce the 27,000 vehicles currently held for parts to less than 5,000 by the end of 2021, he said. The vehicles made headlines for storage in batches in Michigan, Missouri, and Kentucky.
While the operation appears to be proceeding as hoped, Ford executives said their work was just beginning.
“We still have a lot of work to do to harness Ford’s potential. The competitive environment has never been more interesting and challenging, ”said Farley. “I think we have the right plan to drive growth and unlock unprecedented value. We are enthusiastic and energetic.
He noted that the recent shift to customer reservations and online ordering is playing a key role in helping Ford navigate production strategy and delivery plans.
Meanwhile, General Motors announced a 40% drop in third-quarter profits.
GM said net profit of $ 2.4 billion, up from $ 4 billion a year ago. Its adjusted profit before interest and taxes was $ 3 billion, compared to $ 5.3 billion. Revenue fell 25% to $ 26.8 billion from last year’s quarter when it was $ 35.5 billion.
Stellantis has yet to release its third quarter results.
Ford: North America is the key
At Ford, North America led the way with third quarter earnings before interest and taxes of $ 2.4 billion, down 24% from the same period in 2020, and Ford saw its earnings before interest and taxes go from a loss of $ 440 million in Europe. the third quarter of last year at a loss of $ 50 million this year. The company saw a 32% improvement in China, although the company still suffered a loss of $ 39 million there.
Ivan Drury, Senior Director of Ideas at Edmunds, said: “Ford has been one of the automakers hardest hit by the inventory issues created by the chip shortage this year, but the good news is that it seems to find some stability in terms of the market. leaves in T3. “
Ford’s success in the near future will depend on its ability to win back entry-level buyers with the Maverick compact pickup, he said, “and if consumers start to be patient in adopting the Ford’s approach to build-to-order.
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But analysts seemed cautiously optimistic about the future, saying Ford appeared to be emerging from the worst of the supply chain drama.
“Still, for the quarter, Ford’s sales fell, underperforming the market with a further decline in the F-Series,” Michelle Krebs, executive analyst at Cox Automotive, told Free Press Wednesday. “On the positive side, Ford has managed to reduce the incentives as its average transaction price has risen to over $ 50,000. “
She added, “The segment-breaking new Ford Maverick looks like a winner. We are already seeing tremendous interest from buyers. However, it looks like it will sell for well above its starting price of $ 20,000.
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While Ford had a good September, the company was already cutting production at its factories in North America during the fourth quarter, including this week at the Kansas City assembly plant on the Transit vans side. , as well as at the Louisville Assembly Plant, Kentucky Truck and Cuautitlan Stamping and Assembly in Mexico.
Ford’s third-quarter sales in the United States, which accounts for the bulk of its sales, fell 28%, far underperforming the total market, Cox Automotive said in its analysis.
“Notably, Stellantis topped Ford sales in the third quarter for the first time,” according to Cox Automotive. “The profit-generating Series F saw a second consecutive quarterly decline in sales.”
Bronco, Maverick play a big role
Meanwhile, Ford is benefiting from strong consumer demand coupled with weak supplies with rising average transaction prices, detailed by Cox Automotive:
- Ford’s overall average transaction price rose 13% from 2020 to a record high of $ 51,818.
- Ford as a brand recorded an average transaction gain of 13%, taking its ATP to $ 51,307. Series F saw a 13% increase to just under $ 60,000. Shipping jumped 4% to $ 68,257.
- The Bronco Sport cost $ 34,269, about $ 2,000 more than the Escape the design is based on. The bigger Bronco cost on average close to $ 50,000. The Mach-E nearly $ 55,000.
- Lincoln’s average transaction price jumped 10% to $ 63,236. Lincoln’s most expensive vehicle, the Navigator SUV, rose 4% to almost $ 95,000. The smaller Aviator now has an ATP over $ 70,000.
A year ago, $ 45,891 was Ford’s highest third-quarter average transaction price in the previous five years.
Consumption incentives also fell to their lowest level in at least six years. Cox Automotive calculated that Ford spent 43% less on incentives than a year ago, an average of $ 2,482 per vehicle.
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Yet data compiled by Cox Automotive indicates that all is not rosy:
- Sales and market share figures for the Ford and Lincoln brands fell to their lowest level in at least six years. In total, Ford sold 397,644 vehicles, down 28% from the third quarter of 2020 and far underperforming the total market, which was down 13%.
- The Ford brand sold 380,606 vehicles, down 27%. All Ford-branded models saw double-digit sales decline in the quarter, with the exception of the E-Series commercial van which fell only 2%. The Ford Expedition recorded sales down just 14%. Series F fell 22%. The rest of the models decreased by larger percentages.
- New models have softened the blow by generating additional sales. The newly launched Bronco sold 9,403 units during the quarter. The Bronco Sport recorded 20,690 sales. The electric Mustang Mach-E was launched in 5,880 units.
- Lincoln sold 17,038 vehicles, down 38%. All models except one saw double-digit declines except the Nautilus, which rose 17%.
- Below industry sales pushed its overall market share to 11.7%, down 2.3 percentage points from the quarter last year. Ford’s brand share was 11.2%, down 2.1 percentage points. Lincoln’s share was 0.5%, compared to 0.7%.
Overall, Wall Street analysts responded positively to Ford’s earnings reports.
Garrett Nelson, vice president of CFRA Research, told investors on Wednesday in his note: “Ford has arguably the most positive momentum around its new vehicle portfolio of any automaker and we are optimistic about its turnaround. operational under the leadership of CEO Jim Farley.
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