Washington DC, (Business Emerge), July 25: Ford Motor Company has reported a disappointing second-quarter profit, leading to a 12% decline in its stock price during after-hours trading. The Detroit-based automaker posted an adjusted profit of 47 cents per share, falling short of analysts’ expectations of 68 cents, according to LSEG data.
CEO Jim Farley, who has been focused on addressing the company’s quality issues since he took charge in October 2020, has seen limited success. Despite hiring a new executive director of quality and overhauling some production practices, Ford remains at the top of the industry in terms of recalls.
Ford’s Chief Financial Officer, John Lawler, indicated that a significant portion of the warranty expenses were related to vehicles produced before 2021. Warranty costs surged by $800 million in the second quarter compared to the previous period. Lawler assured that these increased field service actions are a one-time cost and anticipates that warranty costs will align with expectations in the latter half of the year.
The company has maintained its annual earnings before interest and taxes forecast at between $10 billion and $12 billion. However, Ford’s electric vehicle (EV) segment continues to be a significant financial burden, with a $1.1 billion operating loss in the second quarter, adding to a $1.3 billion loss from the first quarter. The automaker projects that this division may face a pretax loss of up to $5.5 billion for the year.
In response to the shifting landscape, Ford has adjusted its strategies, including changing the plans for a Canadian assembly plant from producing a three-row EV to focusing on its popular F-150 pickups, due to high demand for these models. Meanwhile, Farley is spearheading efforts to boost hybrid production and develop a platform for a range of affordable, smaller EVs, with work being done by Ford’s California-based “skunk works” team.
In contrast, General Motors (GM) reported stronger-than-expected profit and revenue for the second quarter, driven by robust demand and pricing for its gas-powered trucks. GM has also revised its annual forecast upwards for the second time this year.