Reported by Du Qiaomei, a 21st Century Economic Reporter
After the US stock market closed on October 26th Eastern Time, Ford Motor (F.US) released its Q3 financial report.
According to the financial report, Ford Motor's Q3 revenue was 4.38 billion US dollars, an increase of 11% year-on-year, with a net profit of 1.2 billion US dollars, a loss of 827 million US dollars in the same period last year, and an earnings per share of 0.39 US dollars, lower than the market expectation of 0.45 US dollars.
In the first three quarters of this year, Ford Motor's cumulative revenue was $130.229 billion, compared to $114.058 billion in the same period last year, a year-on-year increase of 14.18%; The net profit was 4.852 billion US dollars, and the cumulative net loss for the same period last year was 3.411 billion US dollars.
Due to the pending approval of a temporary agreement with the United Auto Workers (UAW), Ford Motor withdrew its 2023 full year guidance while releasing its Q3 financial report.
According to the first half of the year's performance, Ford has raised its guidance for 2023, with a full year profit forecast of $11 billion and $12 billion, higher than the previous $9 billion to $11 billion. The adjusted free cash flow is between $6.5 billion and $7 billion, higher than the previous $6 billion.
However, the 6-week strike by car workers has caused Ford a loss of 1.3 billion, exceeding Ford's Q3 net profit.
This includes a loss of approximately $100 million in the third quarter, "said John Lawler, Ford's chief financial officer. Due to a workers' strike, which affected Ford's production process of approximately 80000 cars, restarting production would be a" huge workload ".
Ford CEO Jim Farley stated that Ford's business has been mixed this quarter, and the strike is a challenging situation, but Ford has never lacked challenges.
However, on October 25th before the release of the financial report, Ford Motor reached a temporary agreement with UAW to end a six-week strike by workers.
According to the agreement, Ford will provide automotive workers with a four and a half year labor contract, during which the salary increase will reach a record 25% for the company. Lawler predicts that this will increase Ford's labor costs per vehicle by $850 to $900, resulting in a 0.6% -0.7% decrease in profit margins.
But whether the strike can truly end still depends on the UAW leadership's vote on the agreement on October 29th. In addition, the agreement must be approved by Ford's 57000 American hourly workers, and this process may take several weeks.
After Ford's "compromise", on October 26th local time, General Motors and Stellantis also engaged in intensive negotiations with UAW to end a six week strike one day after Ford reached a temporary contract agreement.
According to data from Anderson Economic Group, a consulting firm headquartered in Michigan, the UAW strike caused over $9.3 billion in economic losses to the automotive industry, of which over $4 billion came from losses from original equipment manufacturers.
However, Farley stated that in addition to the negative impact of the strike, Ford has also dragged down its business due to costs and product quality.
On the one hand, Ford's quality issues in the third quarter were more challenging, with approximately 50000 cars being shelved due to defects or malfunctions.
On the other hand, Ford Model e, the electric vehicle division, continues to suffer losses. Although the Q3 revenue of the department was $1.8 billion, an increase of 26%, the net loss before interest and tax reached $1.3 billion, exceeding analysts' expectations of a loss of $1.27 billion, twice the same period last year. As of the first three quarters of 2023, Ford Model e had an operating loss of approximately $3.1 billion, and Ford expects the business unit to experience a full year operating loss of $4.5 billion.
To address these challenges, Ford is shifting its electric vehicle strategy from a focus on functional development to prioritizing cost efficiency.
As the sales of electric vehicles increase, the price elasticity of consumers decreases, and most consumers are unwilling to pay higher prices for electric vehicles, leading to pricing pressure, which will compress profit margins and hinder the growth of Ford's electric vehicle business. Farley said that Ford has delayed approximately $12 billion in electric vehicle manufacturing capacity plan expenditures, including plans to build a second battery factory in a new park in Kentucky.
The company will not reduce its spending on future electric vehicle models, but it now plans to gradually increase its electric vehicle manufacturing capacity and expenses in this area. Ford stated that it can balance the production of fuel vehicles, hybrid vehicles, and electric vehicles to match the popularity of electric vehicles.