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The exercise of “freedom of selection” by customers has propelled Ford to the top spot in gas vehicles, second in electric vehicles, and third in hybrid vehicles in the U.S. The company is optimistic about achieving its full-year 2024 objectives, including enhancing its efficiency in cash generation.
CEO Jim Farley stated that the second-quarter results were a consequence of the continued implementation of the customer-centric Ford+ strategy – with prudent capital allocation paving the way for sustained long-term growth of a more strategically and financially resilient organization.
“Ford+ is making progress, our foundational quality is improving, and the performance of Ford Pro is demonstrating the substantial potential we have across all our segments,” remarked Farley. “By fostering transparency and accountability through dedicated teams catering to distinct customer requirements, we are making better decisions that deliver increased value to all stakeholders.”
Key Performance Indicators Overview
Ford witnessed a 6% year-over-year increase in revenue during the second quarter, amounting to $47.8 billion, driven by a slight uptick in wholesales. The continuous introduction of new vehicle models, such as the all-new F-150 pickup and record-breaking sales of Transit commercial vans, played a key role in maintaining the growth momentum.
The company’s net income stood at $1.8 billion, with adjusted earnings before interest and taxes (EBIT) reaching $2.8 billion. While profitability was impacted by higher warranty provisions, efforts to enhance the quality of new products are yielding positive outcomes, with potential benefits for customer satisfaction and Ford’s operational performance.
Recent data from J.D. Power revealed Ford’s climb of 14 positions to claim the 9th spot in the 2024 U.S. Initial Quality Study. The Bronco Sport was recognized as the top-performing small SUV in terms of initial quality, while Ford’s luxury brand Lincoln received accolades for improved performance.
“Our internal assessments also indicate similar advancements in quality,” noted John Lawler, Vice Chair and CFO at Ford, “with reductions in incidents during the critical initial three-month period, commonly referred to as ‘3MIS’ in the industry.”
Data from product launches and 3MIS serve as leading indicators for future warranty expenses, with present quality enhancements typically translating into favorable financial results in the future.
“Although considerable efforts are still required to elevate quality standards and reduce costs and complexities, our team is dedicated, and we are making progress in the right direction,” Lawler emphasized.
Operating cash flow for the second quarter amounted to $5.5 billion, with adjusted free cash flow standing at $3.2 billion. At the end of the quarter, Ford boasted a robust balance sheet, with nearly $27 billion in cash reserves and approximately $45 billion in liquidity, enabling disciplined capital allocation towards fostering both long-term growth and rewarding shareholders.
The company announced a regular dividend of 15 cents per share for the third quarter, payable on Sept. 3 to shareholders on record as of the close of business on Aug. 7.
During the second quarter, Ford Pro recorded an EBIT of $2.6 billion, marking a 7% increase with a 15% margin. Segment revenue surged to $17.0 billion, a 9% growth rate – three times higher than the rate of product shipments during the period.
The demand from commercial clients for Super Duty trucks and Transit commercial vans has outpaced production capabilities. Given the increasing popularity of the Super Duty and its strategic significance for Ford, the recent decision to add a third assembly plant in North America for manufacturing these trucks was announced.
Commencing 2026, the Oakville Assembly Complex in Ontario, Canada, will initially augment production capacity for Super Duty trucks by up to 100,000 units, with potential future additions including a multi-energy technology variant, supplementing the existing production at the Kentucky Truck and Ohio Assembly plants under the “Built Ford Tough” brand.
Subscriptions to Ford Pro software witnessed a 35% surge in the quarter, while the fulfillment of mobile repair orders by the company’s fleet of around 2,000 service vehicles more than doubled.
Segment Highlights
Farley highlighted that commercial customers are often early adopters of various technologies, such as connected and increasingly electric vehicles, before individual consumers. The benefits derived by customers and the company from the customer-focused segments outlined in Ford+ are initially evident in this domain.
“The competencies being developed in electric vehicles and software-enabled services establish strong competitive advantages for Ford Pro over other players,” Farley explained. “From small enterprises to large corporations, these capabilities serve as pathways to their organizational transformation alongside our own corporate evolution.
“Over time, we aim to extend these advantages to Ford Blue and Ford Model e customers, differentiating us further from both traditional and emerging automotive companies,” Farley added.
In the second quarter, Ford Blue witnessed a 3% increase in wholesales and a 7% growth in revenue, reaching $26.7 billion. Notable growth was observed in truck volumes, with robust overall pricing. The EBIT of $1.2 billion experienced a decline from the same quarter last year, primarily due to higher warranty expenses.
The sale of hybrid vehicles surged by 34%, constituting nearly 9% of all Ford vehicles globally. This figure represents a two-point increase from the second quarter of 2023, with additional hybrid models of the company’s popular products in the pipeline.
Despite about $400 million in cost reductions year-over-year in the segment, Ford Model e reported an EBIT loss of $1.1 billion due to persistent pricing pressures in the first-generation electric vehicle market and reduced wholesales. Ford Credit registered earnings before taxes of $343 million in the second quarter.
Outlook for Full-Year 2024
Emphasizing the significance of Ford+, Lawler underscored the company’s commitment to establishing a foundation for profitable long-term growth. Ford remains on track to deliver a robust operational performance for the full-year 2024. The adjusted EBIT guidance range remains between $10 billion to $12 billion, with adjusted FCF expectations raised by $1 billion to a range of $7.5 billion to $8.5 billion.
Capital expenditures for the year are anticipated to fall within the $8.0 billion to $9.0 billion range, with a company-wide focus on the lower end of the spectrum.
Projections for full-year EBIT indicate an increase for Ford Pro, now ranging between $9.0 billion to $10.0 billion, driven by continued growth and a favorable product mix. However, the outlook for Ford Blue has been revised downwards to $6.0 billion to $6.5 billion, reflecting higher-than-anticipated warranty costs.
The projected full-year loss for Ford Model e remains at $5.0 billion to $5.5 billion, underpinned by ongoing pricing pressures and investments in next-gen electric vehicles. Earnings before taxes from Ford Credit are poised to reach approximately $1.5 billion, signifying a double-digit percentage rise from 2023.
Ford is scheduled to disclose its third-quarter 2024 financial results post the close of market on Monday, Oct. 28.
SOURCE: Ford
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