Ford Leaves $2B In Profits ‘On The Table’

Published on 02 Feb 2023

Ford, Leaves, Profits, On, Table

After a year of struggling with supply chain challenges and production instability that reduced sales and increased operating expenses, Ford revealed that it generated $10.4 billion in net income, falling considerably below its projection and missing Wall Street's expectations.

There was a drop of as much as 8.3 percent in after-market trade, but the stock eventually recovered. Furthermore, Ford's stock price drops $6.15, or 6.15%, to $14.32 for a brief period.

Ford's CEO, Jim Farley, assured investors and analysts on a conference call that the automaker is taking steps to fix the issues that led to the company's missed.

Ford CEO Jim Farley stated that the company "could have done far better." The company says it will increase earnings by $2 billion via better execution and performance after leaving $2 billion on the table.

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Data Breakdown

Ford's quarterly revenue of $44 billion was 17% more than the $37.7 billion it posted in 2022. Ford's full-year revenue of $158.1 billion was up 16% from the $136.3 billion it earned in 2020.

During the last three months, Ford earned $1.3 billion in net profits (using GAAP accounting) but lost $2.1 billion for the year.

Ford had an adjusted profit of $2.6 billion in the last quarter of 2022 and $10.4 billion for the whole year. In 2021, after adjusting for non-recurring items, Ford earned $10 billion in net income.

Ford said it would have adjusted profits of $11.5 billion to $12.5 billion for the year. A shortfall of $1.1 billion for the year.

Ford reported an annual operating cash flow of $6.9 billion and a $9.1 billion adjusted free cash flow for the year. As of the end of 2022, the corporation said it had $32 billion in cash.

According to Farley and Chief Financial Officer John Lawler, Ford's restructuring and the continued demand for its goods will allow the firm to make up for past mistakes in 2022. However, they added a word of caution, saying that there are still potential obstacles to overcome in 2023, such as the possibility of a mild U.S. recession and a moderate European recession, as well as other economic trends like a sustained strong U.S. currency.

Ford specifically mentioned increased consumer incentives throughout the sector as supply and demand for vehicles rebalance, leading to reduced profits. This is jargon for the ongoing automotive price drops.

Ford has expanded manufacturing and lowered prices for its all-electric Mustang Mach-E crossover by between 1 and 8 percent since January. Tesla has been using this strategy of steadily decreasing costs over the last several months.

Many in the electric vehicle industry believe a price war has broken out since Tesla has offered discounts or credits on its vehicles at least four times in the previous six months. The current trend was initiated in October, when Tesla announced price cuts in China of up to nine percent on the Model 3 and Model Y. For the month of January, Tesla offered price cuts of up to 20% in North America and about 14% in China.

Challenges in the Supply Chain

Like many other automakers, Ford has been struggling with supply chain bottlenecks, rising materials and freight prices, and a need for more capacity in the last two years.

For instance, Ford warned last autumn that supplier costs would be $1 billion more than projected in the third quarter due to increasing inflation and chronic global supply chain challenges. Ford also said that thousands of partially finished cars had been backed up due to a lack of parts. Ford estimated that until the end of the third quarter, it would have between 40,000 and 45,000 incomplete cars in its inventory waiting for essential components. The vast majority of these vehicles would be high-margin trucks and SUVs.

Those difficulties persisted right up to the year's conclusion.


Featured image: Ford


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