Ford’s surprise profit paves way for electric-car investment

Bloomberg

Ford Motor Co.’s gas-powered SUVs and trucks helped haul in an unexpected fourth-quarter profit, providing a down payment on the $29 billion the
automaker plans to spend
developing electric and autonomous next-generation
vehicles.
The manufacturer almost doubled its planned spending on EVs to $22 billion through 2025, a response to the bold initiative outlined by General Motors Co., which aims to go to all zero-emission models by 2035. Dearborn, Michigan-based Ford also plans to spend $7 billion on driverless-car technology.
Chief Executive Officer Jim Farley is trying to demonstrate Ford’s ambitions are just as aggressive as its crosstown rivals, while he also works to grow profits with products such as the latest version of its F-150 pickup — the top-selling vehicle in the US for four decades.
Ford posted adjusted earnings per share of 34 cents that easily blew past the 7-cent loss analysts predicted on average. Adjusted earnings before interest and taxes of $1.7 billion exceeded the $347 million average estimate.
Farley said sales are brisk for the redesigned F-150, the company’s cash cow, with models lasting less than a week on dealer lots.
Executives at the automaker are quick to distinguish GM’s future goals with Ford’s here and now: They pointed to new EVs such as the plug-in Mustang Mach-E, a battery-powered F-150 pickup due out next year and an early investment in startup Rivian Automotive Inc., which will begin production of its own electric vehicles later this year.
Most of Ford’s income still comes from gas-powered SUVs and trucks. Lawler said the company is on course to earn $8 billion to $9 billion in adjusted earnings before interest and taxes — including a $900 million non-cash gain on its investment in Rivian — and generate $3.5 billion to $4.5 billion in adjusted free cash flow in 2021.
Ford said investments in next-generation technology go well beyond the powertrain.
The automaker also is rapidly moving into Big Data and connected car services, partnering with Alphabet Inc.’s Google unit to bring Android to its cars and also hinting at a coming announcement with Microsoft Corp. for commercial vehicles.
Farley declined to provide details on the deal with Microsoft, saying only that it’s something “we’ll tell you about some other day.”

But Ford also faces headwinds including a global semiconductor shortage that is curtailing production of its F-150 just as the automaker is building inventory on dealer lots of the redesigned truck. Ford said the shortage could cut planned first-quarter production by as much as 20% and reduce adjusted earnings before interest and taxes this year by an estimated $1 billion to $2.5 billion.
It also suffered setbacks with the failure of talks to form a joint venture in India with Mahindra & Mahindra Ltd. and a $610 million airbag recall safety regulators required last month after denying Ford’s appeal.
Farley inherited a slow-moving restructuring effort his predecessor, Jim Hackett, initiated in 2018. The new CEO, who took over in October, said Ford has spent $7.1 billion in earnings before interest and taxes and $1.6 billion in cash on its global overhaul.
Revenue was $36 billion in the fourth quarter, 9% less than a year ago — before the onset of the global coronavirus pandemic.
North American operations continued to drive Ford’s results, with earnings before interest and taxes in the latest quarter of almost $1.1 billion, up 53% from the $700 million of a year ago. In Europe, which has long been a loss maker, it reported a $414 million fourth-quarter profit — what Ford says is the highest quarterly profit in the region in more than four years.
The automaker’s pretax quarterly loss of $66 million in China, where sales have surged lately, improved from the $207 million loss last year. And in South America, where Ford announced last month it would cease production in Brazil after a century of carmaking, Ford lost $105 million compared with a $176 million loss a year earlier.
Over the past decade, Ford has lost $4.5 billion in South America — which Farley said is “not acceptable.”