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Ford Motor Co Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Global revenue reached an all-time record at the company of $185 billion.
- The company finished the year with global wholesales up 1% to 4.5 million units, supported by growth in Ford Pro.
- The Ranger has grown into a strong global franchise for the company.
- The company expects a loss of $5 billion to $5.5 billion for Ford Model e holding losses stable YoY.
- The company expects the reduction to be due to the reduction in EBIT.
- The company expects the activity in the factories to impact Super Duty, Navigator Expedition.
- The company expects adjusted EBIT to be in the range of $7 billion to $8.5 billion.
- The company expects to partially offset headwinds by about $1 billion of net cost reductions, primarily coming from lower warranty expense and material costs.
- The company expects material cost efficiencies, lower product costs, and potentially lower warranty costs due to some initiatives.
- The company expects a more normalized adjusted EBIT in Q2 with a plan to hit the underlying EBIT level in H2 as cost improvements tied to lower material cost start to accrue to the bottom line.
- The company expects a loss of $5 billion to $5.5 billion for Ford Model e holding losses stable YoY.
Q&A Highlights from Ford Motor Co Earnings Call Q4 2024
- Analyst asked about Ford Motor Co's EV plans and resource allocation in the current environment.
- Ford Motor Co is confident in their EV strategy, as most things are playing to their strengths. They believe that if the EPA or the California waiver is pulled, or there's a change to the CO2 regime in the US, there will still be some kind of modest CO2 improvement required. EVs are 8% of the US industry and growing, with higher satisfaction than combustion vehicles, and customers who buy EVs don't go back to combustion for large parts. This is a vibrant market and a global capability for Ford. In this environment, the skunkworks platform becomes more important, as it is more affordable for customers without a leasing advantage. Ford has made some decisions on the three-row and others, and will continue to make adjustments. They are not shy about making changes to their lineup, but see no need to do so at this point.
- Ford Motor Co is confident in their EV strategy, as most things are playing to their strengths. They believe that if the EPA or the California waiver is pulled, or there's a change to the CO2 regime in the US, there will still be some kind of modest CO2 improvement required. EVs are 8% of the US industry and growing, with higher satisfaction than combustion vehicles, and customers who buy EVs don't go back to combustion for large parts. This is a vibrant market and a global capability for Ford. In this environment, the skunkworks platform becomes more important, as it is more affordable for customers without a leasing advantage. Ford has made some decisions on the three-row and others, and will continue to make adjustments. They are not shy about making changes to their lineup, but see no need to do so at this point.
- Analyst asked about the company's guiding principles and convictions in the current environment.
- The company's guiding principles include a non-negotiable cost journey, investment in affordable vehicles, diversification of powertrains, and a focus on reoccurring revenue and services. The company also emphasizes the importance of having the best talent and culture, and a sustainable approach to quality and cost.
- The company's guiding principles include a non-negotiable cost journey, investment in affordable vehicles, diversification of powertrains, and a focus on reoccurring revenue and services. The company also emphasizes the importance of having the best talent and culture, and a sustainable approach to quality and cost.
- Analyst asked about the weaknesses in Model e and how the company plans to offset those gains and improvements.
- The company is experiencing downward pressure on pricing in Europe and North America, but they have been able to hold flat while increasing volume significantly. They are also facing additional costs related to their BOSK battery factory and Gen 2 products, which are about $0.5 billion more than in the past. Despite these challenges, the company has continued to do well with their Gen 1 products, including the Mach-E, which had a 30% increase in sales quarter-over-quarter and stayed above the average transaction prices.
- The company is experiencing downward pressure on pricing in Europe and North America, but they have been able to hold flat while increasing volume significantly. They are also facing additional costs related to their BOSK battery factory and Gen 2 products, which are about $0.5 billion more than in the past. Despite these challenges, the company has continued to do well with their Gen 1 products, including the Mach-E, which had a 30% increase in sales quarter-over-quarter and stayed above the average transaction prices.
- Analyst asked about Ford's approach to the Chinese automotive market, specifically regarding subsidies and data privacy concerns.
- James Duncan Farley acknowledged the significance of the Chinese automotive market and the need for fair policies to ensure a level playing field. He emphasized the importance of data privacy and national security, as well as the need for the right policies to address these concerns. He also mentioned that Ford is committed to standing on its own two feet in competition with Chinese automakers.
- James Duncan Farley acknowledged the significance of the Chinese automotive market and the need for fair policies to ensure a level playing field. He emphasized the importance of data privacy and national security, as well as the need for the right policies to address these concerns. He also mentioned that Ford is committed to standing on its own two feet in competition with Chinese automakers.
- Analyst asked about Ford's AI strategy and leadership position in autonomy.
- James Duncan Farley acknowledged the importance of AI in the automotive industry and Ford's commitment to developing its internal capabilities in this area. He highlighted the company's progress in developing a Level 2, Level 3 system, and its plans to continue investing in this area. He also mentioned that Ford is open to partnering with other companies to stay competitive in the market.
- James Duncan Farley acknowledged the importance of AI in the automotive industry and Ford's commitment to developing its internal capabilities in this area. He highlighted the company's progress in developing a Level 2, Level 3 system, and its plans to continue investing in this area. He also mentioned that Ford is open to partnering with other companies to stay competitive in the market.
- Analyst asked about the risk of something more than just price moderation, such as a larger price war in pickups.
- Sherry House explained that the risk is due to the fact that Ford only had 13% of model year 2025 inventory in Q4, and as they move through Q1, they expect their transactions to be about 50% model year 2025. This natural uptick in transaction pricing will counteract the pricing pressure. Additionally, the company has new product launches, such as the Navigator and Expedition, which will also help mitigate the risk.
- Sherry House explained that the risk is due to the fact that Ford only had 13% of model year 2025 inventory in Q4, and as they move through Q1, they expect their transactions to be about 50% model year 2025. This natural uptick in transaction pricing will counteract the pricing pressure. Additionally, the company has new product launches, such as the Navigator and Expedition, which will also help mitigate the risk.
- Analyst asked about the possibility of a price war in pickups due to the competition running a dealer cash program.
- James Duncan Farley acknowledged that the competition is running a dealer cash program for pickup trucks, which is a significant change. However, he assured that the company will always protect its brands and pricing capabilities in key segments, and that they have a plan to get their dealer supply inventories below 60 days. He also stated that the company will lose everything if it does not maintain its pricing discipline, which is tied to inventories.
- James Duncan Farley acknowledged that the competition is running a dealer cash program for pickup trucks, which is a significant change. However, he assured that the company will always protect its brands and pricing capabilities in key segments, and that they have a plan to get their dealer supply inventories below 60 days. He also stated that the company will lose everything if it does not maintain its pricing discipline, which is tied to inventories.
- Analyst asked about the potential cost impact of sustained tariffs on Ford and how the company plans to offset it.
- Ford's management stated that the company is in a good position to handle a short-term tariff situation, but if the tariffs were to persist, it would have a significant impact on the company's operations. The company has good stock levels of components and dealers, and can adjust its manufacturing patterns in the US and Mexico to minimize the impact. However, Ford's US plants are already busy, and the company would have to make major strategy shifts, including building new plants, to accommodate the tariffs. The management also expressed confusion about the inconsistent application of tariffs on other companies, such as Hyundai, Kia, and Toyota, and urged for a comprehensive policy that applies to the entire industry.
- Ford's management stated that the company is in a good position to handle a short-term tariff situation, but if the tariffs were to persist, it would have a significant impact on the company's operations. The company has good stock levels of components and dealers, and can adjust its manufacturing patterns in the US and Mexico to minimize the impact. However, Ford's US plants are already busy, and the company would have to make major strategy shifts, including building new plants, to accommodate the tariffs. The management also expressed confusion about the inconsistent application of tariffs on other companies, such as Hyundai, Kia, and Toyota, and urged for a comprehensive policy that applies to the entire industry.
