Ford cuts profit outlook as price war pressures earnings; shares decline
Ford cuts profit outlook as price war pressures earnings; shares decline
Ford Motor Co. said Monday it now expects to only hit the bottom end of its annual profit guidance, resulting in its shares plunging 5 percent during after-hours trading. Automaker had expected earnings before interest and taxes would total around USD 10 billion, but now it forecasts about that same amount.
Jim Farley, CEO, was speaking to analysts and he spoke about the impact of a global price war brought on through overcapacity and the advent of a myriad of new electric vehicle (EV) models AND increasing compliance pressures. “But it’s no doubt a global price war to the automotive,” he added.
Meanwhile, General Motors (GM), a rival, recently saw its third quarter results surpass Wall Street’s expectations and said profits would remain steady next year. Ford is dealing with supply chain disruptions exacerbated by recent hurricanes and elevated warranty costs, according to Chief Financial Officer John Lawler.
However, Ford saw its third quarter net income fall less than analysts expected by 22 cents a share to USD 900 million, from 30 a share. In August the company took a USD 1 billion charge to cancel a three-row electric SUV production.
Both Ford and other domestic automakers are taking on top interest rates in conjunction with plentiful inventory that up incentives and may trim profit margins, said CFRA Research analyst Garrett Nelson. Ford said quarterly earnings of 49 cents per share were reported on an adjusted basis, but, on an adjusted basis, fell slightly short of analysts' expectations of 47 cents.
To keep the company’s battery powered business model moving, executives say new vehicle launches have to be profitable within 12 months.
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Over the past year, Ford stock's decline of more than 6% outpaced that of Jeep maker Stellantis, which has tumbled by more than 40% as North America sales slowed.
In contrast, GM has emerged as the strongest of the Big Three, with shares up about 47% this year due to consistent upward guidance.
