Ford Motor Company
Ford Motor Company is an American multinational automobile manufacturer. The company manufactures passenger cars and trucks as well as automotive parts and accessories.
The company also sells automobiles and commercial vehicles under the Ford brand and luxury cars under its Lincoln luxury brand.
They are evolving to focus on services, experiences, and software as well as vehicles.
Employees: 176,000
Revenue: $158.1 billion year to date
HQ Location: Dearborn, Michigan, US
What they do:
Ford develops and delivers innovative, must-have Ford trucks, sport utility vehicles commercial vans and cars, and Lincoln luxury vehicles, as well as connected services.
Ford is also establishing leadership positions in mobility solutions, including self-driving technology, and provides financial services through the Ford Motor Credit Company.
Their vision and priorities:
To help build a better world, where every person is free to move and pursue their dreams.
They are committed to doing this from the way they source their materials, to the vehicles that they create, to the services that they provide, and to the interactions they have with their customers, employees, and communities.
Financial Goals
Ford+ is their plan for growth and value creation, intended to transform their company to win in this new era of electric and connected vehicles by developing always-on customer relationships, must-have connected products and services, and by leading the electric vehicle revolution. The automaker says it’s on track to meet its 600,000 EV run rate by the end of 2023 and 2 million by 2026.
Ford+ serves as their roadmap for the next 10-15 years as they move with speed and ambition to fulfill this purpose.
The net proceeds from the company’s inaugural green bond are being allocated to support the design, development, and manufacture of Ford’s electric vehicles.
2023 outlook:
They expect to earn $9 billion to $11 billion in adjusted EBIT, and that assumes a SAAR of 15 million units in the U.S. and 13 million units in Europe.
(SAAR stands for Seasonally Adjusted Annualised Rate - a measure used in the automotive industry to track vehicle purchasing)
They expect to generate adjusted free cash flow of about $6 billion and for capital expenditures to be $8 billion to $9 billion.
The business focus for 2023:
They remain committed to disciplined capital allocation moving forward.
Their balance sheet and liquidity remain strong and their ability to generate free cash flow has improved significantly. This will allow them to accelerate their investment in growth and electrification, but also Pro and software while also returning capital to our shareholders.
They have created 3 distinct customer-facing business segments; Blue, e, and Pro, which has given them greater clarity and insights into each of these businesses and how they can improve each of them uniquely.
Business Highlights of 2022:
In North America, Ford Pros’ vehicle share is almost twice of that of their nearest competitor
In Europe, Ford has been the number-one commercial vehicle brand for eight years in a row.
E-Transit is already America's top-selling electric van with 73% market share. 60% of all of our U.S. Fleet managers plan to add electric vehicles to their fleet within the next two years, and that is before the $7,500 IRA tax credit was announced, which applies regardless of the location of raw materials of batteries.
Subscriptions for software grew over 70%, reflecting new software offerings, a better platform for their software and contracts, and growth in fleet charging attach rates.
Mobile service repair orders increased 85% for them in Pro. This improves the customer experience while importantly increasing the attach rates of their high-margin parts business.
Ford gained nearly one point of market share in the U.S., last year.
Their F-Series was America's best-selling truck for the 46th consecutive year, outselling its second-place competitor by more than 140,000 trucks
Ford was the number 1 brand for recalls in the U.S. so they have overhauled their entire enterprise quality operating system. And they are already seeing improvements in initial quality for vehicles coming out of their plants here in North America.
In the U.S., their EV sales growth is twice the rate of the EV segment and more than 60% of their Model e customers were new to Ford.
The F-150 Lightning has been America's best-selling electric pickup since it launched. And the Mustang Mach-E remains a huge hit for their customers. They remain on track to reach their annualized EV production capacity of 50,000 units per month or 600,000 units globally by the end of this year.
Things to know right now
Ford scales up production
Ford is on a plan to reach its target of 2 million units of capacity by the end of 2026. This growth is being delivered through facilities in North America. They are adding shifts, expanding their facilities, and building out the battery capacity and assembly capacity. Construction is in full swing in Tennessee and Kentucky on their BlueOval City and their three BlueOval SK battery plants. And in Europe, they are moving ahead with a new commercial vehicle battery facility in Turkey.
Critical to their plan is the securing of the necessary raw materials for the batteries to get to that 2 million unit rate, especially lithium and lithium hydroxide, and nickel. They expect to have 100% of the raw materials they need for the 2 million unit run rate secured by the end of this year.
EVs to be sold in high volume from January 2024
In January 2024, Ford will sell EVs in high volume with virtually no inventory, a simple e-commerce platform for their customers, with a non-negotiated price set by the local dealer and remote pickup and delivery for all customer experiences.
BlueCruise was judged the best hands-free system on the market
Their driver-assist hands-free technology has traveled 42 million hands-free miles, so they are rapidly growing and were judged to be the best hands-free autonomous system on the market.
New Financial reporting explained on 23rd March 2023
On March 23, Ford will be holding a teach-in at the New York Stock Exchange. Here they will take everyone through how the new Ford+ segments will alter their financial reporting. The changes will include how revenue, cost products, and assets are assigned to each segment. With this new transparency, they think investors will be better equipped to value how each of their customer-focused segments is contributing to Ford's overall growth and return profile.
Competitors:
Dodge
General Motors
Chevrolet
Nissan
Fiat Chrysler Automobiles
Ford’s Business Segments:
Automotive
The Automotive segment is engaged in developing, manufacturing, distributing, and servicing the vehicles, parts, and accessories of Ford and Lincoln vehicles.
Mobility
The mobility segment is engaged in insurance, loss and damage protection, and personal accident cover for named drivers and passengers. Servicing, maintenance, and repairs at a person’s Ford Dealer. They also offer full breakdown assistance from the RAC and window and windscreen replacement.
Ford Credit
Ford Credit offers various financing plans designed to fit the needs of its customers by combining billing and a variety of commercial financing plans.
Ford has regional business units across North America, South America, Europe, China (including Taiwan), and the International Markets Group.
Note: First Quarter FY23 results will be reported differently from these business segments shown. The new segment changes will be shown in the next report update.
Their financial calendar
Q1: January-March - Around 2nd May 2023
Q2: April-June - Around July 27th, 2023
Q3: July -September - Around 26th October 2023
Q4: October-December - Around 3rd February 2024
Next Earnings Report:
Around 2nd May 2023
Positives from the last earnings report:
For the year: -
They generated a record $9.1 billion in free cash flow. Most of the free cash flow came from the Automotive business including the restructuring of their operations outside of North America.
Per segment:
North America delivered $9.2 billion of EBIT, an improvement of $1.8 billion, driven by higher net pricing and increased volume.
In South America, they delivered a profit of over $400 million, and the region is now de-risked and sustainably profitable.
In Europe, they were slightly above breakeven for the year, but their fourth-quarter results showed clearly below their target. Given the changing macroeconomic environment and demand environment in Europe, they will make the changes necessary to deliver a sustainable business that consistently generates returns above their cost of capital. Their core strength in the region continues to be their leading the commercial vehicle business.
Their International Markets Group earned more than $600 million, driven by the launch of the all-new Ranger and their decision to exit India.
For the quarter (Q4FY22)
Fourth-quarter revenue totalled $44.0 billion
Net income $1.3 billion
Adjusted earnings before interest and taxes $2.6 billion
Operating cash flow of $1.2 billion for the quarter
In North America: Q4 EV sales in the U.S. grew at about 2x the rate of the overall segment
In South America: Q4 Ranger share of segment improved to 12.0%; #2 mid-size pickup in the region
In Europe: Q4 growth of 40% in Ford Pro’s paid Telematics subscriptions
In International Markets: Record Ranger share of 18.3% in Q4
Challenges from the last earnings report:
Their fourth quarter and full-year financial performance last year fell short of their potential - $2 billion of profit was left on the table due to cost and continued supply chain issues.
Reasons also relate to their double transformation, where they need to significantly improve their cost and their quality, but at the same time, grow to fulfill that huge promise in Ford+.
For the year:-
In China, they posted a loss of about $600 million, driven by increased investment in EVs.
Ford Credit delivered EBT of $2.7 billion, which was down $2.1 billion from the prior year, reflecting lower credit loss and lease residual reserve releases, lower financing margin, and lower lease return rates.
Risks to the business:
Ford and Ford Credit’s financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19.
Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule, and a shortage of key components, such as semiconductors, or raw materials can disrupt Ford’s production of vehicles.
Ford’s long-term competitiveness depends on the successful execution of Ford+.
Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs.
Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or new business strategies.
Operational systems, security systems, vehicles, and services could be affected by cyber incidents, ransomware attacks, and other disruptions.
Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor issues, natural or man-made disasters, financial distress, production difficulties, capacity limitations, or other factors.
Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints
Ford’s ability to attract and retain talented, diverse and highly skilled employees is critical to its success and competitiveness.
Ford’s new and existing products, digital and physical services, and mobility services are subject to market acceptance and face significant competition from existing and new entrants in the automotive, mobility, and digital services industries.
Ford’s near-term results are dependent on sales of larger, more profitable vehicles, particularly in the United States.
With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, and protectionist trade policies, or other events, including tariffs.
Industry sales volume in any of Ford’s key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event.
Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors.
Inflationary pressure and fluctuations in commodity prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results.
Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors.
Ford’s receipt of government incentives could be subject to reduction, termination, or clawback.
Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles.
Economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns) could be worse than Ford has assumed.
Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition.
Ford and Ford Credit could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise.
Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations.
Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumers’ heightened expectations to safeguard their personal information.
Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.