Investing in "wrong" companies, Ford Q1 lost $3.1 billion| a one-sentence comment

22/05/06

Lead

It made $2.3 billion from selling cars and $5.5 billion from investing in Rivian.

Author 丨 Yang Jing

Responsible editor 丨 Cui Liwen

Edit 丨 Chic

"Supply chain issues continue to impact our business, including some of our key profit pillars." Ford CEO Jim Farley is making no secret of the current situation. While progress has been made in launching and expanding new products, such as the performance of the F-150 Lightning. But Ford's main focus now remains accelerating supply chain management changes to increase certainty across the value chain.

A few days ago, Ford Motor said that in the first quarter of 2022, the market demand for a series of its new products was strong, but the company's product shipment speed slowed down due to the supply chain problems that continue to plague the industry. In the first quarter, Ford Motor's wholesale sales of nearly 970,000 vehicles, down 9% year-on-year. As demand outweighed supply, Ford prioritized the production of more expensive cars, and inventories remained tight.

Although sales volumes declined, this part of the loss in sales was offset by higher product average prices. As a result, Ford Motor Company's revenue for the first quarter of 2022 was $34.5 billion, and the company's adjusted EBITDA was $2.3 billion. However, due to the decline in the market value of the holding of Rivian in the first quarter, the company suffered an overall net loss of $3.1 billion in the quarter.

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The dividends of electrification are coming

In the first quarter of this year, Rivian shares fell sharply by 51%, reducing the value of Ford's stake from $10.6 billion to $5.1 billion, and Ford executives declined to comment on when or whether to exit Rivian after the lockdown period ended. Even excluding Rivian's losses, Ford's adjusted pretax profit was lower than the $3.9 billion reported last year.

Higher net transaction prices boosted profitability, while higher raw material prices, lower overall product shipments, and a reduced share of pickup and large SUV combinations were the main factors affecting profits. Still, Ford remained strong in business operations, holding nearly $29 billion in cash and $45 billion in liquidity in the first quarter.

Throughout the first quarter, continued shortages of semiconductor chips worldwide affected Ford's production and deliveries in January and February, but productivity increased significantly in March. So as we enter the second quarter, Jim Farley said Ford had a very healthy order profile.

On March 2 this year, Ford Motor announced a strategic transformation and decided to leverage its existing strengths to create new strategic forces by establishing an independently operated automotive business unit within Ford Motor, an electric vehicle business unit Ford Model e, a fuel vehicle business unit Ford Blue, and a business unit serving commercial customers, Ford Pro.

"We've done well in some important businesses, such as mass-producing best-selling models," Jim Farley said, "but there are still some issues in the current business area, and in the area of future technology that we have high hopes for, that need to be improved, and we will actively push for these changes." ”

In terms of products, with the E-Transit in the United States and Europe on schedule, and the official production of the F-150 Lightning pure electric pickup truck in the United States market. Ford is working to break existing limits to offer more Ford vehicles, including electric vehicles, to more customers.

Ford's electric vehicle strategy has yielded some results, such as the F-150 Lightning more than doubling annual production to 150,000 units to meet demand. Ford noted that more than 70 percent of consumers who subscribe to the F-150 Lightning are new to Ford, many of them from states like California and New York, where Ford's market share has been shrinking for years.

Despite a difficult start to the season, the outlook for the rest of the year remains positive. Luo Lixiang said that thanks to strong market demand for existing and new models and sound pricing, the company maintained its adjusted EBITDA forecast for 2022 at between US$11.5 billion and US$12.5 billion, and adjusted free cash flow expected to reach US$5.5 billion to US$6.5 billion.

In the future, Ford's electrification strategy will also help unlock more value. Ford has committed to producing at least 600,000 electric vehicles worldwide by the end of 2023 and will further increase battery capacity to achieve an annual production of more than 2 million electric vehicles by the end of 2026. Ford had a tough start, but better days are yet to come.

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North America > Europe > China

"In fact, in the U.S. alone, our order volume is poised to generate about $17 billion in revenue." John Lawler, Ford's chief financial officer, added that assuming chip shortages improve in the second half of the year, he expects Ford's wholesale car sales to grow by 10 to 15 percent by the end of the year.

In the first quarter, As supply disruptions limited base income and profitability in the regional business, Ford Motor's Europe, South America, China and International Market Group business units have all been restructured and adjusted over the past few years, resulting in a combined EBIT of $300 million. In North America, Ford's EBIT for the first quarter was $1.6 billion.

The number of electric vehicles in the North American market in the first quarter was almost double that of the same period last year, and for the first time, pure electric vehicles accounted for more than 5% of total vehicle sales. Among them, the Ford Mustang Mach-E ranked third in the first quarter of electric vehicle sales with sales of 6,734 units. However, the second-place Tesla Model 3 sold 46,707 vehicles, and the gap between the two is still relatively large.

Ford's wholesale sales in Europe fell 9 percent to 254,000 units in the quarter, compared to 278,000 units in the year-ago quarter, the data showed. Despite declining auto sales due to supply chain disruptions, Ford Motor Europe recovered profitability after three quarters of losses, with a net profit of $207 million in Europe.

Ford Europe revenue declined less than $6.9 billion in the first quarter compared to $7.1 billion in the same period, as higher average prices partially offset lower sales. However, Ford Europe's profit margin was almost halved to 3 percent. Fortunately, the launch of the E-Transit large electric van can continue to improve the basic trajectory of Ford's European business.

Ford Motor has been the region's largest commercial vehicle brand for seven consecutive years, and a year ago, Ford's commercial vehicle management tool, THE FORD Liive Networking System, launched in Europe, which increased its customers' vehicle uptime by about 66,000 days in the first quarter of 2022 alone, is also an example of the strong service value that The Ford Pro will provide to businesses in the global market.

In the strategically important Chinese market, Ford continues to deepen the development of luxury brand Lincoln Motors as the company's long-term profit engine. Lincoln China set another record sales volume in the first quarter, reaching 19,471 units, and achieved consecutive positive quarter-on-year growth. Among them, sales in February increased by 34% year-on-year, the best performance since entering China.

Ford China sold nearly 125,000 vehicles in the first quarter, down 18.8% year-on-year. It is worth noting that the "Ford China 2.0" two strategic products of the new Lincoln Z, the new generation of Ford Mondeo, and Ford Lingrui and other models have received more than expected orders since their launch in March, and the delivery speed of the pure electric SUV Mustang Mach-E is also steadily climbing.

Last year, Changan Ford contributed a net profit of 2.283 billion yuan to the joint venture, while at its peak, Changan Ford's net profit exceeded 19 billion yuan. It can be seen that the potential of Tod Motor in the Chinese market today has yet to be tapped, and it depends on how Jim Farley calculates this account.

Yang Jing

No sleep at noon

Afternoon crash