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 10% increase from the same period last year, driven by strong demand for its electric vehicles and improved pricing. Revenue increased 12% 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 business. 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
Looking at Ford’s business units in more detail:
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: Ford’s electric vehicle unit 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 battery 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 earlier. This was primarily due to higher lease return rates and insurance losses, partially offset by improved financing margins 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 for products like the new Super Duty truck. The company’s ability to pass along higher costs to customers in this segment has helped offset margin pressures elsewhere.
However, Ford continues to struggle with its transition to electric vehicles through the Ford Model e unit. Intense competition, pricing pressure, and the need for significant investment have weighed on the profitability of this emerging business.
The company’s traditional Ford Blue segment, which includes its iconic F-150 pickup, also faces headwinds from higher costs for materials, manufacturing, and warranty expenses. This highlights the challenge Ford faces in maintaining margins on its legacy products as it invests heavily in electrification.
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 truck, and about $2 billion in cost reductions.
The company expects its Ford Pro commercial vehicle business to deliver EBIT of $9-$10 billion, driven by growth and favorable product mix. However, Ford Blue is expected to post EBIT of $6-$6.5 billion, reflecting higher costs, while Ford Model e is forecast to have an EBIT loss of $5-$5.5 billion as it continues to invest heavily in new electric vehicle programs.
Ford Credit is projected to contribute about $1.5 billion in earnings before taxes for the full year.
The company’s ability to successfully execute its Ford+ strategy, which emphasizes electric vehicles, commercial products, and connected services, will be critical to its long-term competitiveness. Managing the transition from internal combustion to electric powertrains, while maintaining profitability on legacy products, remains a key challenge.
Overall, Ford’s second quarter results demonstrate the company’s ongoing efforts to transform its business, with pockets of strength offset by challenges in key areas. Investors will be watching closely to see if Ford can deliver on its ambitious targets for 2024 and beyond.
