new York Ford’s earnings fell well short of its own forecasts last year. Operating profit was $10.4 billion, the second largest US automaker announced on Thursday evening. The company itself had predicted $11.5 to $12.5 billion. “We should have done much better last year,” said CEO Jim Farley. The group left “about two billion dollars in profit on the table”.
Fourth-quarter revenue rose to $44 billion from $37.7 billion in the same period last year. Net profit fell in the final quarter by almost 90 percent compared to the same period last year to $ 1.3 billion. Ford shares fell about 7 percent in after-hours trading.
The result is particularly bitter against the background of the strong numbers presented by Detroit rival GM on Tuesday. In 2022, the automaker had particular success selling high-margin – expensive – vehicles. Sales rose by a quarter in the final quarter, and the stock rose with it.
Ford, on the other hand, suffered at the end of 2022 from the closure of the robotaxi start-up Argo AI, which the group had operated together with Volkswagen. Ford had to write off its investment in Argo AI and lost $2.7 billion.
CFO John Lawler justified the missed earnings forecast largely with the ongoing shortage of computer chips. “I know there’s been a lot of talk about the chip crisis being over,” Lawler said. But with the larger, older chips, which the auto industry mainly uses, there are still capacity bottlenecks. In addition, Ford’s cost structure must be streamlined. The inefficiencies cost 25 to 30 percent of every dollar spent. Therefore, productivity must increase.
Future of the Ford plant in Cologne still unclear
There was hardly any clarity at the analysts’ conference on the future of the German Ford plant in Cologne. Business in Europe is “strong”, Farley explained when asked, and referred to the new plant in Romania.
In the future, a decision will have to be made as to “how many engineers, how many people we need in Europe and how much profile we need for passenger cars”. The electrification of the Cologne location is a done deal. Otherwise, the following applies: “Now is not the right time to talk about the direction in which we will go.” However, the public will “not have to wait long to hear more from us on this subject,” Farley said.
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The future of the Cologne plant after 2030 is therefore still open. Less than 5,000 people work in Cologne vehicle production today, and the production of combustion engines is being phased out. The comparably large Ford factory in Saarlouis is closed.
In response to Tesla’s massive price cuts, Ford has also cut prices. The number two US manufacturer cut prices for its Mustang Mach-E SUV by up to $5,900. The car manufacturer also attracts customers with favorable financing conditions.
Analysts expect a price war if other car manufacturers offer their cars cheaper. Experts are reminded of the times more than ten years ago, when American car companies drove each other into a crisis with a ruinous discount battle.
Ford must continue to reckon with high costs
And Ford could face other high costs: The US Highway and Vehicle Safety Administration (NHTSA) inspects more than 1.8 million Ford Explorer vehicles. The agency said parts of the windshield trim could come loose at higher speeds on models built between 2011 and 2019.
“This is clearly not acceptable,” said CEO Farley, referring to Ford’s recall volume over the past two years. The quality has top priority. Ford has been struggling with profit-sapping warranty costs for years. In 2022, the company recorded the most safety-related recalls of any automaker in the United States.
Assistance: Stefan Menzel.
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First publication: 02.02.2023, 23:01 (last updated: 0302/02/2023, 05:33).