Ford's profits fell in Q3 amid EV charge revenue gains

Ford Motor Co. On Wednesday it said it had net income of $892 million in the third quarter of 2024, a 25% year-over-year decline, after a previously expected $1 billion charge to cancel its all-electric three-row SUV program.

The profit, representing 22 cents per diluted share, came on $46 billion in revenue, up 5.5% despite flat wholesale sales and the company's 10th straight quarter of revenue growth. Those were mixed results compared to Wall Street expectations. Analysts on average were projecting the Dearborn automaker to record $41.88 billion in revenue, which it beat, and 47 cents in earnings per share, which it missed, according to Yahoo Finance.

“We're going to remain laser-focused on costs and become leaner as a company,” Ford CEO Jim Farley said in an investor call.

For the July-to-September quarter, Ford posted adjusted operating income of $2.6 billion, up 18% year over year. Net income margin was 5.5%, up from 5% a year ago. Ford said it expects its annual adjusted operating income to be around $10 billion, at the low end of the $10 billion to $12 billion range it previously stated.

Ford spent $2 billion on materials, manufacturing, freight and labor, Chief Financial Officer John Lawler said on a call with reporters, but product-refresh costs, inflation at the company's joint venture in Turkey and warranty costs, despite improvements in areas that made up for has been In addition, supplier disruptions led to lower-than-expected production in the second half of the year, partly from the impact of hurricanes in the south, but Farley said he also expects supplier production challenges for top-of-the-line products to be resolved by the end of the quarter.

“We are navigating unprecedented change in the industry with a solid plan and attractive product portfolio and the cash and liquidity we need to keep investing in our future and grow our business, our strategic advantage,” Lawler said. “However, costs don't drive the bottom line the way they do. … It prevented us from having a record year, and that's why we're at the low end of our overall guidance.”

Lawler said Ford is still looking to cut costs across the company and has not announced any structural changes or job cuts at this time.

Blue Oval shares fell nearly 6% to $10.70 a share in post-market trading after closing at $11.38 on Monday.

Operating income at Ford Blue, the company's internal combustion engine and hybrid vehicle business, fell 5.3% to $1.627 billion with an operating margin of 6.2%. The company cut its annual outlook for the division to $5 billion from $6 billion, weighing on results down from $6.5 billion in the second quarter after unexpected warranty costs from older models. Farley said China and its exports, which are not broken down quarter by quarter, contributed more than $600 million to operating income this year.

A refresh of the Ford Maverick compact truck and Bronco Sport SUV in the fourth quarter, as well as the Expedition and Lincoln Navigator SUVs in the first quarter of 2025, are expected to help with warranty costs. The 68-day dealer stock is higher than Ford's 60-day target, but Farley said the company is holding onto the product in preparation for this upcoming launch.

CFRA Research's Garrett Nelson maintained a hold recommendation on Ford shares in a note following the results and cut his one-year price target to $11 from $1.

“We expect Ford and other domestic automakers,” he wrote, “to continue to struggle with an inventory glut, which should result in increased incentives and other measures eating into margins.”

Ford's U.S. sales rose less than 1% in the third quarter and crosstown rival General Motors Co. It has surpassed it in US electric car sales. Earlier in the month Ford launched its “Power Promise” which includes an offer to pay for a home charger and its standard installation for those who buy a new Ford EV until the end of the year.

The loss posted by the Ford Model E, the business unit dedicated to electric vehicles, was $1.224 billion compared to $1.329 billion a year ago. Ford is forecasting a $5 billion loss on the Model E in 2024, on the lower end of its previously shared $5 billion to $5.5 billion range.

The automaker cut $1 billion in EV costs alone, including a 35% reduction in capacity, Farley said. Ford took $500 million off the Mustang Mach-E in the third quarter, Lawler said, and has cut costs by $5,000 per vehicle over the past two years, Farley said. With about 150 nameplates expected to be launched across the North American industry by 2026, executives said they expect continued cost pressures. The scaling of EVs in Europe has made their contribution margin positive, and the company expects to be in compliance there under increasingly stringent emissions rules next year, Farley said.

The Dearborn automaker said in August it was scrapping plans for a three-row, all-electric SUV whose launch had been delayed by two years, less than five months ago, at a cost of $1.9 billion. Executives say the EV market isn't ready for the product to be profitable.

It was a different story at Ford Pro, the Dearborn automaker's commercial vehicle business. It posted more than $1.814 billion in operating income, up 9.7% from last year, and an operating margin of 11.6%. It projects revenue from the division of $9 billion for the year, at the low end of the $9 billion to $10 billion range it previously shared.

The company is still forecasting adjusted free cash flow between $7.5 billion and $8.5 billion. Ford expects capital expenditures of $8 billion to $8.5 billion, a slight adjustment from $8 billion to $9 billion.. It expects pre-tax earnings of around $1.6 billion for Ford Credit, up from the $1.5 billion it previously shared.

The company also announced a fourth-quarter regular dividend of 15 cents per share, payable to shareholders on December 2.

Lawler reiterated Ford's goals to provide 40% of 50% of free cash flow. Adjusted free cash flow was $3.2 billion in the third quarter, up 167% year over year.

“I'm not saying that's going to happen in the global economy,” Lawler said. “I'm not saying there's going to be some disruption, but if it were to happen, we'd be very happy to have this cash in hand.”

Beating Wall Street expectations last week, GM posted net income of $3.056 billion on revenue of $48.757 billion in the third quarter, prompting it to raise its annual guidance for the third quarter in a row.

Stellantis NV to report third-quarter revenue and shipments on Thursday; The Netherlands-domiciled automaker reports earnings for the first and second half of each year.

bnoble@detroitnews.com

@brenacinoball