The leading automaker in the US, Ford Motor Co., missed its profit guidance for the full year 2022 because of supply chain disruptions, structural inefficiencies, and quality problems. In today’s breaking news, Ford reported a net income of $1.3 billion in Q4, a YoY drop of 89%. The income in the previous year included gains from investments in Rivian Automotive Inc., an EV startup.
Ford posted Q4 revenues of $44 billion, an increase of 16.7%. It comes amid increased demand from auto enthusiasts and the sale of more expensive models such as SUVs and pickup trucks. In October, the company said its annual guidance would be at the lower end of operating profits before tax between $11.50 billion and $12.50 billion.
Ford executives stated that the company fell short of its higher-end estimates due to difficulties in ensuring vehicle delivery to customers, as well as semiconductor and other auto part shortages. They also claimed increased expenses associated with quality issues and elevated costs associated with the supply chain also hit Ford.
Reports a net loss of $2 billion
Ford stock declined by 6% in after-market trading because its results fell short of analysts’ expectations. The company posted a net loss of $2 billion in 2022. Jim Farley, CEO of Ford, said the company could only report a profit of $2 billion because of issues related to the supply chain.
Full-year guidance for 2023
According to a communiqué from Ford, the operating profits before tax are expected to be in the range of $9.0 billion and $11.0 billion in 2023. The company will improve the cost savings beyond $3 billion. General Motors, the rival of Ford, also reported surprisingly healthy sales in Q4.
According to information gathered from General Motors executives, the company lifted its sales because of reduced supply chain commitments and clearing the backlog for prospective buyers. The company also significantly improved its output. General Motors expects to report a net income of up to $10.1 billion in 2023.
The automotive industry in the US is normalizing after witnessing record-low inventories for several years and a boost in demand for vehicles from consumers. Shares of General Motors closed at $41.50, an increase of 5.60% at 4 PM on Thursday. Its market cap stands at $57.87 billion.
In today’s live breaking news, John Lawler, CFO of Ford, said the company missed its profit guidance because of an ongoing shortage of computer chips. However, John stated that the issues with the computer chip supply are now resolved, but that capacity constraints remain. The company needs to streamline its cost structure to improve its productivity.
Competition in the battery–powered vehicle
Ford laid off several white-collar workers, making it leaner. It also shuttered Argo AI, an autonomous driving unit. After witnessing a significant surge in sales last year, the EV business Ford is facing competition from companies like General Motors, which is introducing battery-powered vehicles in 2023.
Ford lowered the price of some variations of the Mustang Mach-E by 9%, following a price cut by Tesla on some of the models to boost demand. With the market favoring discounts this year, Ford expects the average price of the vehicle to fall by 5%.
