Ford stock slumps as CEO says automaker 'left $2B in profits on the table'

Cristi Croitoru

For the second quarter in a row, Ford Motor Company (NYSE:F) followed a big beat from General Motors (GM) with a disappointment.

The Dearborn-based automaker notched stronger than expected revenue for the fourth quarter at $44B, surpassing the consensus set at $40.73B. However, $0.51 in adjusted earnings per share missed estimates by $0.11. Management blamed “supply chain and production instability,” as well as inflationary impacts and foreign currency fluctuations for the performance.

“We should have done much better last year,” CEO Jim Farley admitted. “We left about $2 billion in profits on the table that were within our control, and we’re going to correct that with improved execution and performance.”

At the start of a call with analysts on Thursday, CFO John Lawler suggested the automaker has “more to do” on job cuts.

For the full-year 2023, management expects to earn $9B to $11B in adjusted EBIT, presuming seasonally adjusted annual rates of about 15M vehicles in the U.S. and about 13M in Europe. The guidance assumes normalizing supply chains as well as a mild recession in the US. A “moderate” recession is anticipated in Europe for 2023.

Shares of the Michigan-based auto manufacturer fell 5.59% in Thursday’s extended trading.

Dig into the details of the results.

Comments

[HoopMac]

Just thinking that the first step in solving a problem is recognizing it. Meanwhile top line grew and profits are robust and F is trading at 8 times Forward Earnings with a solid recurring dividend that is safe.

[RockNBlues]

@HoopMac Funny, different people hear different things from the same earnings call.
What I thought I heard Farley say is that the Mach E was their 1st try at an EV (first inning he called it). He said they now know they can make it more efficient. Better regenerative breaks will increase range. Less wiring and fewer parts will reduce weight and costs. Sounds like they can tweak an already pretty good EV, and make it better and cheaper to build.
Confident the new EV pickup truck (in addition to the Lightning) will be a hit. Also would think the new EV platform shared by several vehicles will be when EV production and sales start to really take off. Hear what you want to hear, but personally I think they are on the right road.

[RockNBlues]

@HoopMac Sorry, my other reply was meant for another poster. I don't see the post that I intended to reply to anymore. Anyway, I agree with your post!

[brf69]

CNN article has good context on the quote with additional excerpts from the call.

CNN: Ford Mustang Mach-E has a mile of wires it doesn't need. That's a big deal.
www.cnn.com/...

[Stewart Foreman]

@brf69

CNN has that story wrong. That stuff about the Mach E is not really the $2 billion Farley was talking about. That $2 billion shortfall was mostly about supply chain execution.

The context of that quote about the Mach E was Farley addressing a question of how he is going to eventually get to high profit margins in EVs. His point was just talking about lessons learned from the first iteration of the Mach E and explaining how they are going to continuously reduce costs.

[pikefitter2]

Jim Farley is not CEO material, he is a Cheerleader. - F150 is the best selling, F150 for last 46 years, Marc E is the best selling electric, E transit is fastest growing.- Stop cheerleading and do what CEO's get paid to do. Ford has a marketing department.

[brf69]

@pikefitter2 if the ceo isn't the number 1 cheerleader, marketer, and seller of the company and its products, then they should be fired.

[Risk Advisor]

@pikefitter2

You are raising a very important point. This morning I was reviewing the list of Ford Motor executive officers. It appears as if Ford does not at this time have a Chief Operating Officer.

Mr. Farley is not qualified to be the CEO and COO. The latter needs to be a very detailed demanding operations driven type of individual who sets very high goals/standards with strict rules of accountability, who is not afraid to fire people who do not perform. Yes men/women need not apply.

Want to reduce cost of goods sold as a percent of revenues, as discussed in the earnings conference call, hire a take no excuses COO.

Meanwhile Jim Farley can continue as Chief Cheerleader Officer (CCO) telling us that Ford has the best selling pick-up truck for the past forty years.

[pikefitter2]

@brf69 It is OK to talk good about your products, but the CEO can not jet set to every event, news show, every open mic, someone has to stay home and get down in the nooks and crannys and lead, troubleshoot, fix the broken

[Billbrows]

Ford should split ICE and EV as two separate companies. I am still holding on to FORD and will drip all the div received.

[jarratta]

@Billbrows Dividend Fund F HAS split into ICE and EV! Hence the brouhaha .

[Billbrows]

@jarratta totally into separate two companies on the exchange. Not within Ford Motors.

[Investor since ‘73]

@Billbrows Dividend Fund I believe that creating separate divisions was the correct path. EVs made up only about 6% of F sales last year and will likely still be less than 15% of sales this year. The profits created by sales of ICE age vehicles are funding the massive investments F is making in Tennessee and Kentucky that will allow F to thrive in the future. The transition will not be as simple as throwing a switch or clicking our heels 3x.

[Davejavu]

Jim Farley has been at the helm since Oct. 1, 2020. He said when he began that he expected the job to be challenging. Farley told 20,000 global employees during a town hall on his first day: “We must and will turn around our automotive operations and compete like a challenger. We have to improve product quality and make it a reason to choose Ford."

Well, looks like they are competing like a Challenger...Unfortunately, it was the space shuttle Challenger.

Sorry...just some Friday evening humor.

[Risk Advisor]

@Davejavu

Great humor. Think Mr. Farley would be interested in foregoing one of his Saturday sports car driving events and instead staying at home and watching the 1970 movie "Patton" starring George C. Scott?

A lesson on how to be a leader instead of a cheerleader.

[Who Dat?]

Luckily, I had sold F.

I am not crazy about investing in cyclical industry. However, I do think GM has the best momentum going into 2023+ with their exciting new EVs.

[Davejavu]

As a software engineer, I have worked at Chrysler (forever ago), Ford (3 years ago) and now GM. The drumbeat at Ford was 'back to ten', meaning they wished to get 10% ROI. Ford was perennially running less than 5% ROI. GM is above 10% now. Ford's main problem is they have a ton of grumpy older workers who have the golden handcuffs of a pension. Those grumpy workers don't contribute much and that pension obligation for all those older workers makes it difficult to improve the ROI. In engineering, comparing GM and Ford from the inside, GM wins on low and mid level management. To give an example, Ford thinks a good manager can manage anything. So the electronics division needed to have both software and controls brought up past the 20th century. They should have tapped a silicon valley outsider. But instead, they took a mechanical engineer noise, vibration and harshness expert manager from the engine department and made him director of electronics. Smart tech savvy engineers became sidelined if they spoke up about bad tech related direction. The decisions and the promotions he made doomed Ford for another 15 years. This is but one example of a company that continues to make a series of bad decisions. They won't get to 10% ROI until well after those pension qualified workers have all left the company. The only reason Ford didn't tap government money or go bankrupt is that they were lucky to be still sitting on a pile of cash from when they sold Land Rover and Volvo. The bankruptcy at GM forced them to become a leaner, better run company. Oh, and GM has paid back all that federal government money.

[Mbrot]

I tend to agree with you based on evidence I can find. SO to fix things, F needs to identify the capable people and put them in charge and get rid of the incapable people currently in those positions. Do you see that happening? They have to realize by the number of recalls and how each one was the result of some clusterfk where the problems are. Ditto to supply chain and by benchmarking costs. I do like their strategy, am satisfied with the admission and see the special dividend of a clear signal that they will focus on capital allocation, rewarding shareholders and running an efficient business, as opposed to the voluminous other special div. opinions.

[stormyhank]

Plenty of stories on internet from 2014 and 2015 from reputable sources say that paid it back largely with money that they withdrew from another TARP account. I guess it depends on your perspective, but to me they needed to pay it from auto revenue to qualify as having paid it back.
They might have paid back the government, depending on how you look at it, but the individual investors in their stock and bonds, not so much. I believe I’d have been better off today and had less drama if I’d been holding F instead of GM in those days. Of course the stock market isn’t for those who aren’t comfortable with some level of drama…

[Davejavu]

@Mbrot In the 25 years I have had a an on/off view inside the company (some direct, some through friends inside the company), I see no evidence that management has the capacity to learn from their mistakes. Sure, there are good managers there, but the best way to get ahead there is to be a yes man(/woman). Ford's mechanical engineering is top notch. But their technology is run by mostly unqualified, technologically unsavvy, ladder climbers. When they spun off Visteon, they outsourced all their qualified electronics and software engineers. The have since struggled to understand how to design and program a computer on wheels (as many as 70 microprocessors in a single vehicle). The people rebuilding their tech are NOT qualified for the job. And let's not forget that the things that make a vehicle exciting today IS the technology.

[Keto4me]

Ford is building out an EV business, something that is very hard to do. We know that it's hard because only Tesla and BYD have made a profit to date. Everybody else has struggled especially the legacies. Most legacies will fail, just statistics. Betting that F will be one one to succeed is a wild guess based on nothing tangable.

Their ICE business will collapse. Not this year or next but when the 2026 F150 comes out with better range and features as well as the Silverado and Rivian and Cybertruck, it will be obvious by that time that buying an ICE vehicle will be like buying Kodak or Nokia. By 2027 or 28 latest, Ford Oval will be bankrupt.

Plus we are going into a resession and autos dont do well in a resession speeding up the legacy collapse.

Plus F or any legacy cant compete with Tesla or BYD's scale. No way are they going to out engineer Tesla for the US market. No way can F compete with BYD in China.

Investing in legacies is not logical.

[Risk Advisor]

@Keto4me

Mr. Farley does not think the ICE business will collapse. He expects ICVE and EV to be 50/50 by 2030. Trouble is he has not been right about a lot of things lately

[Take&run]

@Keto4me all those Tesla haters now realize how impressive Musks accomplishment truly are . Which stock is better now ??

[RockNBlues]

@Keto4me The ICE trucks aren't going away a y time soon. They are solid work trucks and companies need them. The F150 Lightning are like family SUVs. Farley says 60% of the EV buyers are new to Ford. They are in position to do well with ICE and EVs.

[Investor since ‘73]

Very disappointing to hear about the continuing chip and production issues. Would have liked to hear more about a plan to correct this situation instead of simply identifying the problems.

I have had great confidence in Farley and his team but my faith has been tested and it’s not unlimited. Willing to accept the special dividend, in addition to the regular outsized dividend which add up to nearly twice the return of a 10 year note and wait until the next quarterly report before re-evaluating my position but the clock is ticking.

[Risk Advisor]

@Investor since ‘73

There's no doubt you will receive a plan. Whether or not it is ever executed is another matter.

[stormyhank]

There are a lot of critical comments here from people whom I suspect have never run any type of company much less one grossing nearly $160B, operating in multiple countries, and making $10B in profit.
If the management team didn’t have a plan to capture 20% more profit from that business I would be stunned. That would be a lack of leadership. Analyzing your business and having goals for improvement is a key facet of leadership . The first rule of achieving a goal is to identify it.
I will only judge them harshly if they don’t move forward with the plan to capture that additional profit.
Ford is one of the key members of my family financial plan. They haven’t gone bankrupt and cost my family nor the federal government money. They have been a regular source of income for a long time. . . I’m going to give them time to execute.

[Jeff Milligan]

@stormyhank, Very well put

[Risk Advisor]

@stormyhank

They have and had have lots of plans. If you agree do you think they have a problem executing them?

[jarratta]

@stormyhank anyone who judge b4 the massive Blue Oval plant has been operating for six months doesn't have a clue about the transformation at hand: corporate.ford.com/...

[dandroidz]

Come on America! Line up for Ford 😂 lightning EVs and just finance it over 108 months for $800/mo and $3k/yr property taxes! Lol! Winning economy!

[electra7]

All ICE legacy makers should get used to periods of pain. It will in all likelihood become a mainstream headline over the next few years.

As an investment, should one have a 20 year investment horizon, one should buy the plainest, ugliest cars of said makers.

Rarity is the only value that really matters. Serious $ on the table.

[Mister Doom]

Ford is the same price it was ten years ago.
Dead money. Unsafe dividend.

[Take&run]

@Mister Doom GM isn’t far behind . Tough industry

[Billbrows]

@Mister Doom, it’s funny you said this. I have owned this ford for almost ten years and you are right. It has been the same price.

[Dale Roberts]

I would never buy a legacy U.S. automaker.

I would never buy an airline.

[capitalstructureman]

admitting to leaving 2 billion on the table is admitting to missmamangent. However since he voluntarily admitted this there needs to be financial repercussions with senior management

[Risk Advisor]

@capitalstructureman

Does the buck stop with Mr. Farley?

[ivan0034]

@capitalstructureman moment of truth for Farley and Lawler. Problem is there is no quick fix.

[EBIX EBUCKS]

@capitalstructureman I can't believe he said that on record. What a blunder. I know everyone makes mistakes, but this one could cost him. It's sure costing shareholders: a nice report now looks like a big miss.

[radhakota]

Very poor execution. Some body needs to be fired. Look at Tesla execution and look at Ford earning call. $2B left on table? Who needs that massive special dividend? We need execution and stock price growth.

[ivan0034]

@radhakota I’ll take both, this is a huge payday for me and comes at a time when i want to help my offspring out a little.

[equitygotti]

I would hate to be an employee

[jimoc]

@equitygotti of ? Or just any employee?

[equitygotti]

@jimoc of ford - just given the comments that the ceo said they have more work to do with job cuts

[J-Flo]

@equitygotti why is that?

[ItsGengar]

Replace the CEO with me! I can lose 2 billion at a cheaper price

[ivan0034]

@ItsGengar very clever!!

[PapaWhisky]

How do you improve execution and performance with job cuts ?

[thirdcamper]

Lesson here seems to be don't leave $2 billion on the table, or if you do don't blather about it on an earnings call.