Ford Motor reports disappointing Q2 performance, stock falls 11%

Ford Motor reported a disappointing second-quarter performance, with adjusted profit falling short of expectations and quality issues continuing to haunt the automaker. The company's shares plummeted 11% in after-hours trading as a result. For the second quarter, Ford posted an adjusted profit of 47 cents per share, well below the 68 cents per share anticipated by analysts, according to data from LSEG.

This miss underscores ongoing challenges for Ford, which is grappling with significant costs related to quality problems and its electric vehicle (EV) initiatives. Since assuming leadership in October 2020, CEO Jim Farley has prioritised addressing Ford's quality issues. Despite efforts to overhaul production practices and bolster quality management, Ford has still faced higher-than-desired rates of vehicle recalls. In the second quarter alone, warranty expenses surged by USD 800 million compared to the previous quarter, largely attributable to issues with vehicles launched in 2021 or earlier.

Ford's financial chief, John Lawler, emphasised that these expenses were driven by one-time costs associated with older vehicles, expressing confidence that the company's full-year warranty cost expectations would be met in the second half of the year.

While maintaining its annual earnings guidance of USD 10 billion to USD 12 billion before interest and taxes, Ford acknowledged the volatility inherent in its transformation journey. Lawler noted that the company's restructuring efforts, aimed at improving efficiency and competitiveness, would encounter occasional setbacks as they progress.

The automaker's EV ambitions have faced challenges amid shifting market dynamics and intense competition, particularly from Tesla and Chinese EV manufacturers. Recently, Ford revised its plans for a Canadian assembly plant originally intended for an EV model, redirecting production towards its popular F-150 pickups due to high demand.

CEO Jim Farley reflected on the difficulties encountered in Ford's EV journey, describing it as a humbling experience that has prompted the company to enhance its overall operational fitness. He highlighted ongoing efforts to expand Ford's hybrid portfolio globally by 40% this year and to develop affordable, smaller electric vehicles through its California-based innovation hub.

Despite a USD 1.1 billion operating loss in the second quarter within its EV and software division, and a similar loss in the first quarter, Ford remains committed to its long-term strategy. Executives anticipate this division to incur a pretax loss of up to USD 5.5 billion for the year, underscoring the financial challenges inherent in transitioning towards electrification.

In conclusion, Ford's recent financial results highlight the complexities and costs associated with its transformation efforts. As the company navigates through quality concerns and works to strengthen its EV capabilities, it remains focused on executing its strategic initiatives amidst a challenging automotive landscape.