In the second quarter, Ford Motor dodged some of the losses suffered by General GM.
Ford reported $40.2 billion in revenue, a 50% increase from the same period last year, and an adjusted operating income of $4.7 billion. After-hours trading sent shares up as much as 6 percent. The shares are up 5.11%.
Ford was expected to have revenue of $34.78 billion and earnings per share of $0.45 by analysts. The company reported adjusted earnings per share of $0.68 in the second quarter of 2019.
Ford reported a net loss of $3.1 billion in the first quarter of this year due to the loss in valuation of its stake in Rivian. It's not the same as General GM, which reported a 40% drop in profits.
Lower sales have been caused by supply chain disruptions in the automotive sector. Ford lost money in its China business. Sales grew in North America and Europe.
In the US, sales were up in the second quarter. There was an 8% year-over-year increase in sales of SUVs and Crossovers. Ford's Q2 net income was up to $667 million, compared to the $561 million it reported in the same quarter of the previous year.
Ford said it is still profitable because of previous restructuring efforts. Europe's sales were strong, with a 22% increase to 222,000 vehicles, which helped offset the effects of Russia war-related supply chain disruptions. Ford made a small profit in Europe.
In China, Ford's wholesale shipments were down 25% this quarter.
The local economy and auto industry were disrupted by the Pandemic in China. Lincoln has gained share in the quarter along with commercial vehicles.
Ford expects an adjusted EBIT of $11.5 billion to $12.50 billion, which would be up 15% to 20% from the previous year. Ford has $5.5 billion to $6.5 billion in cash.
Jim Farley, the CEO of Ford, said during Wednesday's earnings call that he expects the company to produce over 2 million electric vehicles by the end of the decade.
Ford warned that profits will take a hit because of inflation and higher prices for key commodities.
Farley emphasized the company's work to shore up its supply chain, particularly around EV's, in order to avoid the same headaches experienced during the COVID-19 Pandemic.
Ford has been quick to take advantage of the available supply for original equipment manufacturers and has also diversified its battery chemistry.
Ford announced last week that it would use cheaper batteries for some of its cars. The company said it would deliver 600,000 EV by the end of the year.
That doesn't mean Ford isn't vulnerable to supply chain issues in Europe in the future. In order to address the upcoming energy crisis in Europe, Farley identified over 500 active suppliers in high-risk countries.
The risk is between now and mid- 23 and they can manage it. We have a buffer stock of 30 days for our North America vehicle production. We are doing everything we can to get the information we need.
Ford is well-positioned to deal with the costs it can predict despite the fact that costs have gone up due to labor shortages.
Changes to its dealer model is one way Ford is trying to trim costs.
Ford seems to be giving dealers the ability to eat some of the distribution costs. Ford is moving to a low-inventory model in which customers will be able to order a vehicle online and have it shipped to them a month later.
Ford will ensure a smooth e- commerce experience, whether a customer is at a dealership or not. Ford will invest in a post- purchase marketing model.
Dealer margins are still very competitive, but they are going to shift the makeup of those margins in the future.
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Ford plans to start reporting financial results via its three new business segments rather than under just one automotive segment: Ford Model e, which is dedicated to EV, software and connected vehicle technology; and Ford Blue, which will continue to build out internal combustion vehicles.
The mobility segment on the balance sheet will be taken over by Ford Next, which will report on Ford's moves in the area of self-driving cars. Ford Credit is the financial services arm of the car company.
The results of the new segments will be shared early next year.
The restructuring will allow Ford to cut $3 billion in annual costs from its ICE development efforts, which could mean job cuts in the ICE department.
There are too many people in certain areas. Absolutely, no doubt about it. We have jobs that need to be changed because of the skills that we have. There are a lot of new work statements. Every part of our company is being changed by us. We want to simplify the business, we want to make sure we have the right skills, and we want to make sure the works statements are as lean as possible. Our costs are not competitive. We are not satisfied.
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