Ford plummets as higher costs, EV unit take a toll
The company is expected to lose about $7.22bn in market capitalisation at current share price levels of $11.86
25 July 2024 - 14:32
byGokul Pisharody and Amanda Cooper
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A charging cable is plugged into an electric Ford E-Transit in London, Britain. Picture: SUPPLIED
Bengaluru/ London — Shares of Ford Motors sank more than 12% in early premarket trading on Thursday after the automaker missed second-quarter profit estimates, as it struggles with quality-related costs and stiff competition in its EV business.
The Detroit automaker earned an adjusted profit of 47c per share, well below analysts’ expectations of 68c, according to LSEG data. Its peer, General Motors, beat earnings targets on Tuesday.
Ford’s shares dropped 11% in after-hours trading in New York on Wednesday, and its Frankfurt-listed shares fell 8% on Thursday.
Ford is expected to lose about $7.22bn in market capitalisation at current share price levels of $11.86.
Warranty expenses went up $800m in the second quarter compared with the previous quarter, significantly hurting profits in its Ford Blue combustion and hybrid vehicle business.
Analysts at Piper Sandler cited these “unwelcome warranty headwinds” as the reason for the stock slump.
“Ford referenced quality problems on vehicles from the 2016 and 2021 model years, and to address these concerns, the company is shouldering a higher-than-expected warranty burden,” they said.
However, Ford expects the second half of the year to match its warranty cost expectations.
Ford CEO Jim Farley has made fixing the automaker’s quality problems a priority since he took the helm in October 2020.
The company hired a new executive director of quality and transformed some of its production practices to avoid errors, but has still topped the industry in number of recalls.
Legacy automakers have scaled down their EV ambitions amid easing demand, a shift to hybrids, and stiff competition from Tesla and Chinese EV makers in global markets.
“For now, shareholders will have to take a good quarterly dividend … and special dividends as compensation for up-and-down results that continued to be hampered by warranty problems and slower launch ramp-ups,” said David Whiston, analyst at Morningstar.
Ford has a price-to-earnings (PE) ratio of 6.9 compared to GM’s 4.7. So far this year, Ford has risen about 14%, while GM has gained 29%. Reuters
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Ford plummets as higher costs, EV unit take a toll
The company is expected to lose about $7.22bn in market capitalisation at current share price levels of $11.86
Bengaluru/ London — Shares of Ford Motors sank more than 12% in early premarket trading on Thursday after the automaker missed second-quarter profit estimates, as it struggles with quality-related costs and stiff competition in its EV business.
The Detroit automaker earned an adjusted profit of 47c per share, well below analysts’ expectations of 68c, according to LSEG data. Its peer, General Motors, beat earnings targets on Tuesday.
Ford’s shares dropped 11% in after-hours trading in New York on Wednesday, and its Frankfurt-listed shares fell 8% on Thursday.
Ford is expected to lose about $7.22bn in market capitalisation at current share price levels of $11.86.
Warranty expenses went up $800m in the second quarter compared with the previous quarter, significantly hurting profits in its Ford Blue combustion and hybrid vehicle business.
Analysts at Piper Sandler cited these “unwelcome warranty headwinds” as the reason for the stock slump.
“Ford referenced quality problems on vehicles from the 2016 and 2021 model years, and to address these concerns, the company is shouldering a higher-than-expected warranty burden,” they said.
However, Ford expects the second half of the year to match its warranty cost expectations.
Ford CEO Jim Farley has made fixing the automaker’s quality problems a priority since he took the helm in October 2020.
The company hired a new executive director of quality and transformed some of its production practices to avoid errors, but has still topped the industry in number of recalls.
Legacy automakers have scaled down their EV ambitions amid easing demand, a shift to hybrids, and stiff competition from Tesla and Chinese EV makers in global markets.
“For now, shareholders will have to take a good quarterly dividend … and special dividends as compensation for up-and-down results that continued to be hampered by warranty problems and slower launch ramp-ups,” said David Whiston, analyst at Morningstar.
Ford has a price-to-earnings (PE) ratio of 6.9 compared to GM’s 4.7. So far this year, Ford has risen about 14%, while GM has gained 29%. Reuters
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