SPY380.36-1.97 -0.52%
DIA309.45-4.53 -1.44%
IXIC13,192.35+72.96 0.56%

DJ Ford's Results Hindered by Lower Truck Output, Air-Bag Recall -- 2nd Update

· 02/04/2021 18:36
By Mike Colias

Ford Motor Co. said its fourth-quarter earnings were dented by lower truck output, and it vowed to nearly double its investment in electric and driverless cars.

Ford on Thursday said net income reversed to a loss of $2.8 billion for the September-to-December period, hurt by a sizable air-bag safety recall as well as planned factory downtime from its changeover to a redesigned F-150 pickup truck.

Still, the Dearborn, Mich., auto maker's pretax profit surged past the expectations of Wall Street analysts, aided by stronger prices and lower costs. It also forecast 2021 pretax profit that exceeded estimates.

The company's pretax profit adjusted for one-time items, including the air-bag recall, totaled $1.7 billion, or 34 cents per share. Analysts were expecting a loss of 7 cents a share, according to FactSet.

Revenue fell 9%, to $36.0 billion.

Ford shares rose about 2% in after-hours trading.

Ford pegged its 2021 adjusted pretax profit at $8 billion to $9 billion, including a $900 million gain from its investment in electric-truck maker Rivian Automotive. But the company also warned that a global shortage of vehicle computer chips could cut full-year pretax income by $1 billion to $2.5 billion.

The company said it is spending $22 billion on electric vehicles over a 10-year period, from 2016 through 2025. It also plans to spend $7 billion on autonomous vehicles in that time frame, a sum that includes $2 billion it already has incurred, it said.

Valuations for Tesla Inc. and many electric-vehicle startups have soared in recent months, and some analysts have said Ford's plans in that space appeared to lag behind those of rival General Motors Co. and others.

Ford is in the midst of a multiyear plan to return to profit growth, after logging its fifth straight year of declining pretax income. Chief Executive Jim Farley has said a string of vehicle introductions this year should begin to lift profitability.

An obstacle for Ford in boosting profits has been nagging vehicle-quality problems. Paying for repairs it is obligated to fix has eroded Ford's bottom line by an additional $1 billion to $2 billion annually over the past few years, compared with historical norms, company executives have said.

Mr. Farley, who took over in October, has expressed frustration over Ford's quality issues, which have also dinged the company's rankings in third-party quality surveys. The CEO has said reducing those expenses is among his top priorities as he tries to tighten operations in Ford's core car-making business while also pursuing future bets on data services and other technologies.

"We haven't fixed the issues that have held us back in our automotive business. They include warranty costs, which remain unacceptably high," Mr. Farley told analysts in October.

Ford's ballooning warranty costs come as it and other auto makers pour billions of dollars into the development of electric vehicles, an area that has drawn investor interest because of its growth potential, but for now is generally a money loser for the car companies. Its quality problems also have exacerbated Ford's profitability gap with rival General Motors Co., which posted a global operating-profit margin of 6.1% in 2019.

Over the first nine months of 2020, Ford incurred about $3.9 billion in warranty expenses, versus about $1.7 billion for GM, regulatory filings show.

Ford executives have said the roots of the quality problems run the gamut from design and engineering flaws to manufacturing flubs to subpar parts from suppliers.

Ford's standing in some influential quality rankings has slid amid the problems.

In Consumer Reports magazine's annual reliability ranking in November, the Ford brand fell six spots, to 22nd among 26 car brands. Ford's other brand, the luxury Lincoln marque, was rated last.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

February 04, 2021 18:36 ET (23:36 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.