DETROIT (AP) — Ford Motor Co. reported on Thursday that its fourth-quarter net profit fell 90% from a year earlier, and company officials said the automaker’s costs were too high and it expects more this year. I promised to tighten the belt of
CEO Jim Farley said Ford should have done better last year, leaving $2 billion in profit on the table, but it was within control. He said Ford will fix that this year with improved urgency and execution.
“These are simple facts, and to say I’m frustrated is an understatement, because this year could have been so much more for us at Ford.
The company is transforming product development, manufacturing and supply chain management to reduce costs while also moving to electric vehicles, he said.
“Problems that are proving difficult to eradicate are deeply entrenched in our industrial system,” he said. “Our product and revenue strength have long masked this dysfunction.”
Chief Financial Officer John Lawler told reporters late last year that a global shortage of computer chips and other components hit Ford hard, killing about 100,000 cars it could have sold. He said production was at a loss.
“Our cost structure is not competitive and our quality is not at the level we need,” Lawler says. He and Farley said there would be more white-collar layoffs, and the company would need to reduce manufacturing and warranty costs.
Roughly $1 billion of the $2 billion loss in profits was due to lower production and lower sales, with the remaining $1 billion in operating costs, Lawler said. He attributes about 60% of the production problems to chip shortages and the rest to component suppliers who struggled to get their factories up and running.
“That’s something we need to manage better,” he said, adding that it was a “hand-to-hand fight” to secure the chips.
To solve this problem, Ford will work with chip suppliers and brokers to redesign its car computers to use a wider variety of chips. “It’s important to be as flexible as possible,” he said.
Lawler expects industry sales in the U.S. to rise to about 15 million units this year, which should help Ford sell more, especially newer models, Lawler said.
Lawler also said Ford expects a mild recession in the U.S. and a mild recession in Europe this year.
But in addition to the recession, Ford sees higher interest rates, lower pension income, lower credit sector profits, and currency fluctuations as headwinds this year.
The company expects vehicle prices to fall about 5% this year as automakers increase discounts and other incentives and vehicle supply improves. Some of it will come from dealers and some from Ford, Lawler said.
The Dearborn, Michigan automaker reported revenue of $1.26 billion from October to December, up 17% to $44 billion. The company delivered his adjusted 51 cents per share, below Wall Street’s estimate of 62 cents.
However, analysts surveyed by FactSet said earnings for the quarter exceeded the estimated $41.39 billion.
Indeed, fourth-quarter 2021 earnings were inflated by one-time items such as an $8.2 billion increase in Ford’s investment in electric-vehicle startup Rivian, whose stock has soared.
Ford posted a net loss of $2 billion for the full year 2022, largely due to one-off items. Investments in Rivian fell by $7.4 billion that year as the stock price plummeted. The company also slashed his stake in Argo AI, an autonomous vehicle unit that dissolved last year, by as much as $2.7 billion.
Ford announced a dividend of 80 cents per share in the first quarter. This is due to strong cash flow and gains from the sale of our investment in Rivian.
Ford, which reported results after the close of trading on Thursday, lost 6.3% in after-hours trading.
The company’s pre-tax revenue last year was $10.4 billion, below its guidance of $11.5 billion.
The company said it expects pre-tax profits to be between $9 billion and $11 billion this year, lower than last year’s estimates.
North America pre-tax income increased $1.8 billion to $9.2 billion. That means about 56,000 unionized factory workers, but in March he received a $9,176 profit sharing check, about $1,800 more than last year.
Sales in the US, Ford’s most profitable market, were down 5% in the fourth quarter. That’s because the company, like other automakers, was hit by parts shortages.
Higher prices for Ford vehicles offset the decline in sales. According to Edmunds.com, customers paid an average of $56,143 for company cars in the fourth quarter, an increase of about 10% over the previous year. Many of these sales were high-end trucks and his SUV.