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Ford Lowers Forecast Amid Pressure From EV Losses

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Bloomberg Oct 28 22:02 · 15.7k Views

Ford said full-year earnings would be at the low end of its forecast as the carmaker struggles to cut costs and overhaul its electric vehicle strategy.

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Transcript

  • 00:00 I do want to start
  • 00:01 looking a little bit forward,
  • 00:03 David, rather than looking backward at the most recent quarter
  • 00:06 and some of the costs and more importantly the losses that we're still continuing to see
  • 00:10 in some of their businesses, including that EV
  • 00:13 related business.
  • 00:15 Yeah, it would be, they said
  • 00:17 they were going to lose 5 billion on the EV business this year.
  • 00:19 I think it lost 1.2 billion in the quarter.
  • 00:22 And I think the problem here is there's nothing really in this
  • 00:25 report that says they're getting that under control.
  • 00:29 You know, the, the earnings they're talking about for the year
  • 00:31 looks like within range, but at the bottom end of the range they were, they were talking about earnings before interest and taxes being as high as 12 billion.
  • 00:38 Now it's coming in maybe closer to 10 billion.
  • 00:40 That tells you that these things like warranty cost losses on electric vehicles that they just don't quite have a handle on that yet to the point where they can give give stronger guidance going forward.
  • 00:50 So I and I think that's what investors were really looking for.
  • 00:52 Whereas you
  • 00:53 know, with General Motors, you had a quarter where
  • 00:56 they were at the higher end of the range and they also had had cash flow forecast that was above the previous forecast.
  • 01:02 All of that says that they're going to keep
  • 01:04 buying shares back and that they're
  • 01:05 they're operating the business well.
  • 01:07 And, and Ford's still trying to get a handle on some of these issues that
  • 01:10 investors were really keying in on
  • 01:12 for this report.
  • 01:13 So let me ask you about the warranty cost because they're an issue in the second quarter and they're still trying to get them under control, like you said.
  • 01:19 Are these tied to EVs or to the ICE vehicles business?
  • 01:23 It's, it's the whole thing, but really it's, it's the internal combustion engine business because they, they don't really have
  • 01:29 that many electric vehicles on the road relative to the ICE vehicles
  • 01:33 that, that it would, it would be driving these kinds of costs.
  • 01:36 So it's, it's just up and down the business that, you know, they, they need to
  • 01:40 rein in the quality problems
  • 01:42 and, and get warranty under control.
  • 01:44 It's the basic blocking and tackling of the auto business
  • 01:47 and it's really been a struggle for them to to
  • 01:51 get this thing nailed down.
  • 01:52 I am curious that when we kind of move outside the world of just the the EVs and
  • 01:57 these renewable energy vehicles,
  • 02:00 I mean, how is the pro division doing?
  • 02:02 Because I know on the last conference call they seem to really tout this
  • 02:05 as being one of the more stable areas
  • 02:07 of Ford right now.
  • 02:09 It is and it's a real strength of the company in the US and they, they do very well with commercial vehicles in Europe too.
  • 02:16 So
  • 02:16 look that that that's, that's sort of a good stable business for them.
  • 02:20 They're
  • 02:21 they're great at selling trucks.
  • 02:22 They've got a good commercial van business as well.
  • 02:25 And and so look that that's something they can, they can pretty well rely on.
  • 02:29 It's just, you know,
  • 02:31 it's the other core part of the business, the retail business where they're having the quality issues and EVs is
  • 02:38 they don't have
  • 02:40 a,
  • 02:41 a dedicated platform where they can really get scale.
  • 02:43 Like selling more of them just loses more money unless they can really get costs out and start to, to, to redo how they engineer those vehicles.
  • 02:50 So, David, when you talk about quality issues and you've been covering autos for a long time, how long does it take for a car maker to fix that, to turn that around?
  • 02:57 I mean, it's not a one quarter thing and it looks like it's not a two quarter thing either.
  • 03:02 That's right.
  • 03:03 It it,
  • 03:04 it's so
  • 03:05 kind of deep into the vehicles themselves.
  • 03:07 It's usually
  • 03:08 sometimes you have a big recall or
  • 03:11 you know some other crisis where it's one particular thing with a vehicle where you stop the sale.
  • 03:15 G Ms.
  • 03:15 had a few of these with the Chevy Bolt years ago and they even had it with
  • 03:20 some of their current models with software and they just stopped selling them until they got a fix.
  • 03:23 And then they
  • 03:24 spread that fix throughout the lineup and they get it back on the road.
  • 03:27 This is, and it's not like Ford has had one big monster recall
  • 03:30 like we've seen with other companies.
  • 03:32 This is just kind of problems here and there where it's warranty sort of across the board.
  • 03:37 And when that's the case, you're looking at different parts, you're looking at processes
  • 03:41 and you're trying to just get a handle on why you keep having these warranty issues that cost the company money.
  • 03:47 And it's it's a Gopher hunt.