Ford’s fourth-quarter net profit jumped to $12.3bn, helped by gains on Rivian’s investment

2022-04-27 0 By

The automaker posted its best financial performance since 2016, despite a global microchip shortage that has limited production.Ford Motor Co posted a profit of $12.3 billion in the fourth quarter of last year, marking its best financial performance through 2021 since 2016, despite current production restrictions that hurt sales and disappointed Wall Street investors, according to foreign media reports.Executives expect profits and sales to increase in 2022 as the automaker expands its electric vehicle portfolio to challenge Tesla’s dominance.”We’ve made incremental changes,” Jim Farley, chief executive, said on an earnings call on Thursday.”We have a clear plan, a preference for action and a whatever it takes mentality.”Ford’s fourth-quarter net income, up from a $2.8bn loss a year earlier, includes an $8.2bn gain on its investment in Rivian, an electric carmaker that went public in November, although it turned a profit in the quarter without that investment and other one-off items.Ford reported adjusted earnings before interest and taxes of $2 billion in the fourth quarter, up 19% from a year earlier.Revenue for the quarter rose 5 per cent to $37.7bn.For the full year of 2021, the automaker posted a net profit of $17.9 billion, up from the $1.3 billion loss it suffered in 2020, the first year of the coronavirus pandemic.The company reported adjusted EBIT of $10 billion for 2021, roughly four times its 2020 earnings and in line with its reclassification of first-quarter Rivian investment gains.Combined with 7.3 per cent earnings before interest and tax, it was Ford’s best performance since 2016, said John Lawler, Ford’s chief financial officer.Ford’s full-year earnings included a $7.4 billion profit in North America.Under the company’s contract with the UAW, workers will receive an average of $7,377 in profit-sharing checks in coming weeks.The performance in North America was Ford’s best since 2017.Ford lost money in every region except International Markets Group, which earned $622 million.Ford on Thursday forecast its adjusted earnings before interest and tax (EBIT) to rise 15 percent to 25 percent to $11.5 billion to $12.5 billion in 2022.The company expects sales to grow 10 to 15 per cent.Chief Financial Officer John Lawler said the high end of the range meant adjusted eBIT of 8 per cent, including 10 per cent in North America.If Ford can hit that target, it will be a year ahead of schedule.Ford shares fell 4.5 per cent to $18.99 in after-hours trading.Mr. Lawler attributed Wall Street’s tepid response to the company’s lack of increased trading volume.”Some people think we can do better in terms of volume,” he says.”But we were unable to exceed our sales expectations as we were aware of supply constraints caused by omicron and semiconductor shortages.”However, he said the company was in a strong position.”Look at our guidance for 2022,” he said.”It shows the strength and momentum of the industry.”Ford plans to launch its E-Transit electric van and f-150 Lightning this year.On Thursday, company executives said they were focused on scaling up those products and raising costs to boost profits.”Our pure electric margins are not where we expected them to be,” Lawler said.”We will not chase the top hat, we will look at scale.We want to have a strong lineup in which we can integrate key vehicles in high-volume segments…We will reduce complexity.”Mr. Farley says Ford has a team working on reducing material costs for electric vehicles, and recently managed to reduce the cost of a Mustang Mach-E by $1,000.Ford plans to increase The Mach e to about 100,000 by 2022 and is working on 150,000 F-150 Lightning fighters by 2023, he said.”We underestimated the demand for the first wave of electric vehicles,” Says Mr Farley.He noted that the company had doubled its electric vehicle production plans to 600,000 vehicles a year.Ford, however, has no plans to limit production of gasoline-powered vehicles.”There’s still a lot of opportunity in the ICE business,” Lawler said.He called it a “strategic advantage.”Farley noted that the company will increasingly focus its ICE business on products for enthusiastic owners, such as the Bronco SUV or Mustang sports car.Mr Lawler said Ford ended the year with more than $36bn in cash and $52bn in liquidity, which will help it implement changes as it develops its business.”That cash will be able to fund our growth.”(Jane)