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Friday, 29 July 2022 09:25

Ford Triples Adjusted Earnings in Second Quarter, Reports $3.7B

Written by Phoebe Wall Howard, Detroit Free Press

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Ford Motor Co. on July 27 reported second-quarter adjusted earnings of $3.7 billion---more than triple that of the same period a year ago, when the company had a gain of $1.1 billion.

The company saw a net income of $667 million compared with a $561 million net income for the same time period in 2021.

 

Ford reported revenue of $40.2 billion compared with $26.8 billion in 2021. The Dearborn, MI, automaker reported $2.9 billion in operating cash flow and adjusted free cash flow of $3.6 billion, compared with a negative free cash flow of $5.1 billion a year ago.

 

Overall, the company beat Wall Street expectations while also raising the shareholder dividend 50% and restoring payments to prepandemic levels.

 

"Based on the company’s financial strength and flexibility, Ford’s board of directors today declared a third-quarter regular dividend of 15 cents per share on outstanding stock," the earnings report said. "The dividend is payable on Sept. 1 to shareholders of record at the close of business on Aug. 11."

 

Meanwhile, Ford Credit saw earnings before taxes of $939 million, a decrease compared with $1.6 billion in 2021.

 

In North America, Ford reported adjusted EBIT of $3.3 billion, up from $192 million in the same quarter last year. Ford reported EBIT losses in other regions, including China, but showed adjusted EBIT of $60 million in its International Markets Group, down from $204 million in the same quarter a year ago.

 

Ford said it still expects to have adjusted EBIT for the full year of between $11.5 billion and $12.5 billion and adjusted free cash flow of between $5.5 billion to $6.5 billion.

 

"It's clear you're seeing that we're transforming the company. ... It's just the beginning," CFO John Lawler told reporters after releasing the data. "Our thinking is much broader. Our ambitions are...


...greater and we have a high sense of urgency. You're starting to see this pull through in both our actions and in our results."

 

Battery and raw material agreements are essential to the progress in the move to electric vehicles and Ford is on track in those areas, he said.
 
Ford products are selling as quickly as they can be made, Lawler said.

 

"We need to reduce costs," Lawler said. "The lower costs will be an outcome of reshaping virtually every aspect of the way Ford does its business."

 

Ford has new priorities, new technologies and an emphasis on modernizing during this fluid period, he said. "We're going to strategically invest."

 

Ford CEO Jim Farley reiterated his desire to reduce complexity in the company and offer fewer versions of the same vehicle, a path taken by Tesla that has proved highly profitable. He said he's "pleased" with the company's progress but "not satisfied."

 

The automaker is currently in the process of "cost reduction efforts" but Lawler declined to comment on head count or time frames. "We're reshaping every aspect of the way we're doing business."

 

Farley said Ford continues to be "hampered" by recalls and costs related to quality issues, which wastes money and weakens customer satisfaction. The company continues working to remedy the situation, he said.

 

Garrett Nelson, analyst at CFRA Research, recommended July 27 that investors buy Ford stock and said, "CEO Jim Farley said the company is moving with purpose and speed into the most promising period for growth in Ford's history. ... Ford remains one of our top picks in the auto industry."

 

By contrast, General Motors reported July 26 a 39% drop in second-quarter earnings from 2021, and said it was...


...already taking cost-cutting measures.

 

GM reported a second-quarter net income of $1.7 billion compared with $2.8 billion in the year-ago period. GM saw continued strong demand for big pickups and large SUVs, which carry wide profit margins. GM's net revenue for the quarter rose to $35.8 billion compared with $34.2 billion a year ago.

 

In recent days, Farley didn't deny a Bloomberg report that the company planned to cut as many as 8,000 jobs. Cuts have been deemed necessary for the long-term viability of the company.

 

In March, the company announced it needed to slash $3 billion over the next two or three years from its gas-powered operation and redirect money to its battery electric vehicle development and technology. These cuts are part of a restructuring plan designed to make the firm more competitive, creating separate units within the company called Ford Pro for business customers, Ford Blue for gas-powered vehicles and Model e for electrification.

 

The challenge, of course, is that traditional gas-powered vehicles---especially pickup trucks---generate significant revenue needed to pay for future development.

 

Farley told analysts during the earnings call that cost reduction comes primarily in the Ford Blue part of the business simply because that's where the majority of people work. But cuts will not be indiscriminate, as they may have been in the past, but more strategic as the company and its needs evolve, Farley said.

 

Ford will comment on its actions on its own schedule, he said during introductory remarks to industry analysts.

 

Adam Jonas, a veteran industry analyst at Morgan Stanley, said to Farley during the earnings call, "This is one of the most positive Ford calls I can remember in a long time. Does Ford have too many people?"

 

Farley responded, "We absolutely have too many people in certain places, no doubt about it. We have skills that don't work anymore. And we have jobs that need to change. ... We know our costs are not competitive."  

 

During this period of transition, the company has seen longtime members of the management team leave, including Hau Thai-Tang and Frederiek Toney, while recruiting new talent from Silicon Valley to focus on key priorities, including Doug FieldAlan ClarkeAnnie Liu and Jennifer Waldo.

 

We thank the Detroit Free Press for reprint permission.

 

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