Ford’s Financial Performance: Navigating Challenges and Opportunities

Ford Motor Company has released its financial results for the third quarter of 2024, providing insights into the company’s performance and outlook. Despite facing some headwinds, Ford has demonstrated resilience and a focus on strategic initiatives to drive growth and profitability.

Overview of Financial Performance

In the third quarter of 2024, Ford reported net income attributable to the company of $892 million, with Company adjusted EBIT (earnings before interest and taxes) reaching $2,550 million. This represents a decrease in net income compared to the same period a year ago, primarily due to certain one-time charges and expenses.

The company’s performance was impacted by several special items, including a write-down of assets related to the cancellation of a previously planned all-electric three-row SUV program, pension-related costs, and continued restructuring actions in Europe. These special items totaled $1.4 billion in pre-tax charges for the quarter.

Segment Performance

Ford’s business is divided into several key segments, each with its own unique dynamics and challenges.

Ford Blue Ford Blue, the company’s traditional internal combustion engine vehicle business, saw a 2% decrease in wholesale units compared to the same period a year ago. This was primarily due to the end of production of the Edge model in North America and fewer vehicles produced and sold in China by Ford’s unconsolidated affiliates. However, the segment’s revenue increased by 3%, driven by higher wholesales excluding the China operations and favorable pricing.

Ford Blue’s EBIT (earnings before interest and taxes) was $1.6 billion, a decrease of $91 million from the previous year. This was mainly due to unfavorable exchange rates and higher manufacturing costs, partially offset by lower warranty expenses and improved pricing.

Ford Model e The Ford Model e segment, responsible for the company’s electric vehicle (EV) initiatives, saw a decrease in wholesale units of 11% compared to the same period a year ago, reflecting a more competitive EV market environment. Revenue for the segment declined by 33%, primarily due to lower net pricing and lower wholesales.

Ford Model e’s EBIT loss improved by $105 million compared to the previous year, reaching a loss of $1.2 billion. This was driven by lower costs, including reduced battery-related raw material and other material expenses, as well as lower warranty costs, partially offset by unfavorable net pricing.

Ford Pro The Ford Pro segment, focused on commercial and fleet vehicles, experienced a 9% increase in wholesale units compared to the previous year, driven by higher sales of the Transit family of vehicles and the Super Duty lineup. Revenue for the segment increased by 13%, reflecting the higher wholesales, favorable product mix, and stronger pricing.

Ford Pro’s EBIT was $1.8 billion, an increase of $160 million from the same period a year ago. The improved performance was driven by favorable market factors, partially offset by higher warranty costs and growth-related structural expenses.

Ford Credit Ford Credit, the company’s financing arm, reported a third-quarter 2024 EBT (earnings before taxes) of $544 million, an increase of $186 million compared to the same period a year ago. This was primarily due to higher financing margin and increased receivables, partially offset by lower expected auction values and higher return rates on existing operating leases.

Ford Credit’s total net receivables at the end of the third quarter of 2024 were $142.2 billion, up 13% from a year ago, driven by higher consumer and non-consumer financing, as well as a larger lease portfolio. The segment’s liquidity position remained strong, with $29.6 billion in available liquidity at the end of the quarter.

Strengths and Weaknesses

Strengths:

• Strong performance in the Ford Pro segment, driven by continued growth and favorable product mix
• Improved profitability in the Ford Model e segment, with lower costs and better pricing management
• Robust liquidity and funding position at Ford Credit, providing financial flexibility

Weaknesses:

• Decline in net income and margin for the overall company, primarily due to one-time charges and expenses
• Ongoing challenges in the Ford Blue segment, with lower wholesale volumes and higher costs
• Competitive pressures in the electric vehicle market, impacting the Ford Model e segment’s performance

Outlook and Future Prospects

For the full year 2024, Ford now expects adjusted EBIT of about $10 billion and adjusted free cash flow of $7.5 billion to $8.5 billion. This revised guidance reflects lower-than-planned volume in the second half of 2024 for the Ford Pro and Ford Blue segments due to supplier disruptions.

On a segment basis, the company expects:

• Ford Pro EBIT of about $9 billion, driven by continued growth and favorable mix, as well as pricing strength on core products
• Ford Blue EBIT of about $5 billion, reflecting a balanced market equation and higher product, manufacturing, and warranty costs, offset partially by cost efficiencies
• Ford Model e EBIT loss of about $5 billion, driven by continued pricing pressure and investments in new electric vehicles
• Ford Credit EBT of about $1.6 billion

The outlook for 2024 assumes a flat to modest U.S. industry growth, a full year of the all-new Super Duty lineup in the Ford Pro segment, lower industry pricing, and $2 billion in cost reductions in material, freight, and manufacturing.

Conclusion

Ford’s financial performance in the third quarter of 2024 reflects a mixed picture, with strengths in the Ford Pro and Ford Credit segments, but ongoing challenges in the Ford Blue and Ford Model e segments. The company’s strategic initiatives, such as the Ford+ plan and investments in electrification, are aimed at positioning Ford for long-term success, but near-term headwinds, including supplier disruptions and competitive pressures, have impacted the company’s outlook for 2024.

As Ford navigates these challenges, the company’s focus on operational efficiency, product innovation, and financial discipline will be crucial in driving sustainable growth and profitability. Investors and stakeholders will closely monitor Ford’s ability to execute its strategic plans and adapt to the evolving automotive landscape.