FORD MOTOR COMPANY QUARTERLY REPORT ON FORM 10-Q
Ford Motor Company’s quarterly report for the period ended June 30, 2024, shows a mixed performance. The company reported a net income of $2.1 billion, a 14% increase from the same period last year, driven by strong demand for its electric vehicles and improved pricing. Revenue increased 10% to $43.4 billion, driven by higher sales volumes and pricing. However, the company’s operating margin decreased to 6.4% due to increased costs and investments in electric vehicle technology. Ford’s cash and cash equivalents decreased to $24.4 billion, primarily due to investments in its electric vehicle business and a decline in accounts receivable. The company’s debt increased to $123.4 billion, primarily due to the issuance of new debt to fund its electric vehicle investments. Despite these challenges, Ford remains committed to its electric vehicle strategy and plans to invest $50 billion in electric vehicle technology by 2025.
Overview of Ford’s Financial Performance
In the second quarter of 2024, Ford Motor Company reported net income of $1,831 million and adjusted EBIT (earnings before interest and taxes) of $2,757 million. This represents a decrease in net income of $86 million compared to the same period a year ago.
The lower net income was primarily driven by weaker performance in the Ford Blue segment, which includes the company’s traditional internal combustion engine vehicles. This was partially offset by stronger results in the Ford Pro commercial vehicle business and a pension remeasurement gain.
Ford’s revenue in the second quarter grew 6% year-over-year to $47.8 billion, reflecting higher vehicle sales volumes and pricing. However, the company’s net income margin declined from 4.3% to 3.8%, and its adjusted EBIT margin fell from 8.4% to 5.8%.
Segment Performance
Ford Blue: This segment, which includes the company’s traditional gas-powered vehicles like the F-150 pickup, saw a 50% decline in EBIT to $1.2 billion. The lower profitability was driven by higher warranty costs, material costs for new products, and manufacturing expenses, partially offset by increased sales volumes.
Ford Model e: The electric vehicle division reported an EBIT loss of $1.1 billion, a $63 million wider loss than a year ago. This was due to lower pricing, lower sales volumes, and unfavorable product mix, partially offset by lower material costs.
Ford Pro: The commercial vehicle business delivered strong results, with EBIT increasing 7% to $2.6 billion. This was driven by higher sales volumes, favorable pricing, and mix, partially offset by higher growth-related costs.
Ford Credit: The company’s financing arm reported EBIT of $343 million, down $47 million from a year ago. This was primarily due to higher lease return rates and insurance losses, partially offset by improved financing margin and volume.
Strengths and Weaknesses
A key strength for Ford is the continued strong performance of its Ford Pro commercial vehicle business, which is benefiting from robust demand and pricing. The company’s traditional Ford Blue lineup also remains profitable, though margins have come under pressure.
However, the Ford Model e electric vehicle division continues to struggle with pricing pressure and high investment costs, weighing on the company’s overall profitability. Ford will need to improve the performance of its EV business to remain competitive in the rapidly evolving auto industry.
Another weakness is the company’s high warranty costs, which have been a drag on the Ford Blue segment. Improving quality and reliability will be important for Ford to maintain healthy margins on its internal combustion engine vehicles.
Outlook and Future Prospects
For the full year 2024, Ford is forecasting adjusted EBIT in the range of $10-$12 billion and adjusted free cash flow of $7.5-$8.5 billion. This outlook assumes flat to modest growth in the U.S. auto market, continued strong demand for the new Super Duty commercial truck, and $2 billion in cost reductions.
On a segment basis, Ford expects:
- Ford Pro EBIT of $9-$10 billion
- Ford Blue EBIT of $6-$6.5 billion
- Ford Model e EBIT loss of $5-$5.5 billion
- Ford Credit EBT of about $1.5 billion
The company’s long-term competitiveness will depend on the successful execution of its Ford+ strategy, which aims to grow its traditional business while also investing heavily in electrification and new mobility solutions. Key risks include supply chain challenges, rising material and labor costs, and the ability to maintain pricing power in a competitive EV market.
Overall, Ford appears to be navigating a challenging environment reasonably well, with strength in its commercial and financing operations offsetting continued pressure on its electric and traditional vehicle margins. However, the company will need to make further progress in improving the profitability of its EV business to drive sustainable long-term growth.
