Ford has said that its EV business unit (‘model e’) posted a third quarter loss in earnings before interest and taxes (EBIT) of $1.33 billion, compared with an EBIT loss of $1.08 billion in the second quarter.
The company’s margins are coming under pressure from heavy investment in the EV unit as well as a price war for EVs initiated by Tesla. Furthermore, it now faces additional labour costs under a pending deal with the US UAW labour union.
According to the company, many North America customers interested in buying EVs are unwilling to pay premiums for them over gas or hybrid vehicles, sharply compressing EV prices and profitability.
Ford has said it is delaying investment in its battery plants and adjusting its powertrain mix in response to market dynamics.
“Ford is able to balance production of gas, hybrid and electric vehicles to match the speed of EV adoption in a way that others can’t,” said CFO John Lawler. “That’s obviously good for customers, who get the products they want – and good for us, too, because disciplined capital allocation and not chasing scale at all costs maximizes profitability and cash flow.”
Ford also withdrew its full-year 2023 guidance pending ratification of a tentative agreement with the UAW.
Through the third quarter, Ford earned $9.4 billion in adjusted EBIT toward the full-year range of $11 billion to $12 billion it affirmed in late July. Based on that and strong demand for Ford’s products, Lawler said that the company had been poised to deliver profitability within that range. However, given effects of the UAW strike and with ratification of the tentative agreement with the union that was announced Wednesday night pending, Ford is withdrawing its guidance for full-year 2023 operating results.
Despite the guidance change and headwinds that appeared to initially spook investors, Ford company revenue in the third quarter was $44 billion, up 11% from third-quarter 2022 on flat vehicle wholesales. Net income of $1.2 billion reversed a year-ago net loss of $827 million. The latter included a $2.7 billion non-cash, pretax impairment on Ford’s investment in Argo AI. Adjusted earnings before interest and taxes, or EBIT, in Q3 increased to $2.2 billion.
