Ford Motor Co. F-N reported a dip in second-quarter adjusted profit on Wednesday as the automaker continues to battle costly quality issues and an electric-vehicle business that is weighing on its bottom line, sending shares tumbling 12 per cent in after-hours trading.
The Detroit automaker earned an adjusted profit of 47 US cents a share, significantly missing analysts’ expectations of 68 US cents, according to LSEG data.
Ford chief executive Jim Farley has made fixing the automaker’s quality problems a priority since he took the helm in October, 2020. Since then, Ford has hired a new executive director of quality and transformed some of its production practices to avoid errors, but has still topped the industry in its number of recalls.
Ford’s chief financial officer, John Lawler, said most of these warranty expenses were related to older vehicles launched before 2021. Warranty expenses went up US$800-million in the second quarter compared with the previous quarter, Mr. Lawler told reporters. The CFO said field-service actions in the quarter were a one-time cost increase for the older vehicles and Ford expects the second half of the year to match its warranty-cost expectations.
The carmaker maintained its projected annual guidance of US$10-billion to US$12-billion in earnings before interest and taxes.
Legacy automakers have scaled down their EV ambitions amid easing demand, a shift to hybrids and stiff competition from Tesla Inc. and Chinese EV makers in global markets.
Earlier this month it shifted plans for a Canadian assembly plant that was expected to build a three-row EV, instead saying it would produce Ford’s flagship F-150 pickups. Mr. Farley said the company was struggling to meet soaring demand for the gas guzzlers.
On the battery-powered front, Mr. Farley is directing the company’s efforts to ramp up hybrid production as well as developing a platform for a lineup of affordable, smaller electric vehicles, which Ford is doing out of its California-based “skunk works” team.
Ford recorded a US$1.1-billion operating loss for its electric-vehicle and software division in the second quarter, adding to its US$1.3-billion loss from the first quarter. Executives expect this section of the company to sustain a pretax loss of up to US$5.5-billion for the year.
Crosstown rival General Motors Co. reported second-quarter profit and revenue on Tuesday that beat Wall Street’s expectations, buoyed by strong pricing and demand for gas-powered trucks. The company raised its annual forecast for the second time this year.