Ford Motor Co. announced a downward revision in its 2024 earnings guidance on Monday, attributing the shift to ongoing warranty costs and slower-than-anticipated progress in reducing operational expenses.
Despite surpassing Wall Street’s revenue and profit forecasts for the third quarter, the automaker’s stock dropped by 6% in after-hours trading.
In its latest report, Ford noted that its third-quarter net profit dropped nearly 26% from the previous year. The automaker recorded $892 million in profits from July through September, down from $1.2 billion in the same period last year, following a $1 billion write-down linked to the discontinuation of a planned electric SUV. However, excluding one-time items, Ford reported an adjusted pretax profit of $2.6 billion, equivalent to 49 cents per share—exceeding analysts’ expectations of 46 cents per share. Ford’s quarterly revenue rose by 5.5% to $46.2 billion, outpacing Wall Street’s estimate of $45.2 billion.
Yet, Ford’s cost challenges, particularly warranty expenses, led the company to trim its full-year pretax income guidance to the lower end of its $10-12 billion forecast. Ford CEO Jim Farley highlighted the impact of these expenses on the company’s earnings power and reaffirmed a commitment to reduce warranty costs and achieve greater efficiency. According to CFO John Lawler, while warranty costs have slightly decreased from last year’s third quarter, they remain elevated. For example, Ford reported an $800 million increase in warranty expenses during the second quarter alone.
The company is also working to close a $7 billion cost gap with its competitors, although progress has been gradual. Ford has cut $2 billion in material, freight, and labor costs so far this year, yet these savings have been offset by high warranty expenses and inflation at its Turkish joint venture. According to Farley, the automaker’s restructuring efforts in markets like Europe and China have contributed significantly to profitability.
Ford’s electric vehicle (EV) sector remains an area of intense focus and ongoing cost control. The company’s EV unit posted a $1.2 billion loss in the third quarter, with cost reductions partially offsetting competitive pricing pressures. Nonetheless, Farley expects future EV models to turn profitable within the first year of sales. The automaker’s efforts to control costs within its EV business include a recent $1 billion cost reduction initiative, primarily through restructuring its battery manufacturing operations.
Despite these challenges, certain Ford divisions continue to perform well. Ford Pro, the company’s commercial vehicle arm, reported pretax profits of $1.81 billion, while Ford Blue, which produces gas and hybrid vehicles, earned $1.63 billion.
Ford ended the third quarter with $5.5 billion in cash flow from operations, supported by $28 billion in cash and $46 billion in liquidity—providing what the company described as “considerable flexibility in a dynamic environment.”
The Associated Press and Market Watch contributed to this report.
