Energy & Critical Metals
Ford Miss On 3Q 2023 Earnings Includes Huge Losses in EV Segment
After stock market closed yesterday, Ford Motor Company (NYSE: F) reported 3Q 2023 financial results which exceeded year-ago levels but trailed
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After stock market closed yesterday, Ford Motor Company (NYSE: F) reported 3Q 2023 financial results which exceeded year-ago levels but trailed analysts’ forecasts. More specifically, Ford recorded 3Q 2023 EBIT of US$2.2 billion versus US$1.8 billion in 3Q 2022 and consensus 3Q 2023 projections of US$2.6 billion.
This news was mostly overshadowed by the previous day’s announcement that Ford had reached a tentative labor agreement with the United Auto Workers (UAW) union. The accord, which appears to be a win for the union and will likely serve as a template for General Motors Company (NYSE: GM) and Stellantis N.V. (NYSE: STLA) deals, includes an aggregate 25% raise over 4 ½ years plus improved retirement benefits. The UAW’s initial demands included a 40% wage boost. Ford estimates the approximate six-week strike will cost the company about US$1.3 billion in 2023.
READ: UAW, Ford Reach Tentative Deal That Proposes 25% Pay Bump
Looking to the future and from a Ford shareholder’s perspective, the labor agreement will add notably to Ford’s costs. Ford CFO John Lawler estimates that, when fully effective, the incremental labor costs will add US$850-US$900 to its per-vehicle production cost. Phrased differently, Barclays’ analysts believe that by the end of this new labor contract, the boost in wage and benefit costs will increase Ford’s annual expenses by US$1-US$2 billion.
One key element of Ford’s 3Q 2023 earnings release is the extraordinary magnitude of losses, and the alarming rate at which those losses are building, at the company’s electric vehicle (EV) business. EV operating losses reached US$1.3 billion in the just-completed quarter compared with US$1.1 billion and US$0.7 billion losses in 2Q 2023 and 1Q 2023, respectively.
FORD MOTOR COMPANY — SELECTED ELECTRIC VEHICLE DATA AND PROJECTIONS
| 3Q 2023 | 2Q 2023 | 1Q 2023 | Full-Year 2022 | Full-Year 2021 | |
| EV Units Sold to Dealer Network | 36,000 | 34,000 | 12,000 | 96,000 | 61,000 |
| Change from Year-Ago Period | 44% | 42% | -32% | 57% | |
| Revenue, in millions of US$ | $1,800 | $1,800 | $707 | $5,300 | $3,100 |
| Change from Year-Ago Period | 26% | 38% | -32% | 71% | |
| Operating Income, in millions of US$ | ($1,330) | ($1,100) | ($722) | ($2,100) | ($900) |
| Operating Income as a % of Revenue | -75.6% | -56.9% | -102.1% | -40.6% | -28.8% |
| Forecast of Full-Year 2023 Operating Income, in millions of US$ | Withdrawn | ($4,500) | ($3,000) | ||
| Revenue Per Vehicle | $50,000 | $52,941 | $58,929 | $55,208 | $50,820 |
| Operating Income Per Vehicle | ($36,944) | ($32,353) | ($60,167) | ($21,875) | ($14,754) |
| Management’s Projection of Future Operating Margin | Withdrawn | 8% Sometime in Future | 8% in 2026 | ||
| Date Ford Will Achieve 600,000 EV Annual Production Rate | Withdrawn | Sometime During 2024 | End of 2023 | ||
| Date Ford Will Achieve 2,000,000 EV Annual Production Rate | — | Unsure | End of 2026 |
Reflecting the extraordinarily competitive EV business where the pressure to cut sticker prices is relentless, Ford’s revenue per EV produced was only about US$50,000 in 3Q 2023, down a remarkable 15% from US$59,000 just two quarters ago. These pricing pressures plus higher costs translated into a 3Q 2023 operating loss per vehicle produced of US$37,000. Not surprisingly, Ford’s EV unit’s operating margin was -76% in 3Q 2023.
READ: Ford Suspends Construction on $3.5 Billion EV Battery Plant Amid Labor Strife
Ford apparently does not see a turn in the EV business anytime soon, as it is starting to conserve cash. The company postponed US$12 billion in planned EV manufacturing capital expenditures, including a planned EV battery manufacturing facility in Kentucky.
Of course, Ford’s results in its EV unit cannot be considered a hopeful sign for the either itself or for other competitors in this ultra-competitive industry. In particular, there seems no reason to expect a material change anytime soon in the enormous amounts of cash that start-up EV manufacturers such as Lucid Group, Inc. (NASDAQ: LCID) or Rivian Automotive, Inc. (NASDAQ: RIVN) are burning each quarter.
Ford Motor Company last traded at US$11.35 on the NYSE.
Information for this story was found via Edgar and the sources mentioned within the article. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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