Ford reveals third-quarter net loss, weighed down by supply chain problems and Argo A.I. investment

Ford on Wednesday updated its guidance to forecast full-year adjusted earnings before interest and taxes of about $11.5 billion. Read more...

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DETROIT – Ford Motor recorded a net loss of $827 million during the third quarter, weighed down by supply chain problems and costs related to disbanding its autonomous vehicle unit Argo AI.

Still, the automaker was able to narrowly beat Wall Street’s subdued expectations for the period and guided to the lowest end of its previously forecast earnings for the year.

Shares of the company were down roughly 1.5% in extended trading following the report.

Here’s how Ford performed during the third quarter, compared with analysts estimates as compiled by Refinitiv:

  • Adjusted earnings per share: 30 cents vs. 27 cents estimated
  • Automotive revenue: $37.2 billion vs. $36.25 billion estimated

The auto industry’s earnings and forecasts are being closely watched by investors for any signs that consumer demand could be weakening amid rising interest rates and looming recession fears. However, both Ford and crosstown rival General Motors continue to say demand for their products remains strong despite outside economic concerns and rising interest rates.

Ford reported adjusted earnings of $1.8 billion for the quarter, down 40% from a year earlier but slightly above its own previously announced expectations, set last month.

Ford in September partially pre-released its results, including projected adjusted earnings before interest and taxes in the range of $1.4 billion to $1.7 billion — some analysts had been expecting a quarterly profit closer to $3 billion — but affirmed full-year guidance of adjusted earnings before interest and taxes of between $11.5 billion to $12.5 billion.

On Wednesday Ford updated its guidance to forecast full-year adjusted earnings before interest and taxes of about $11.5 billion. It raised its full-year adjusted free cash flow forecast, however, to between $9.5 billion and $10 billion – up from $5.5 billion to $6.5 billion – on strength in the company’s automotive operations.

Argo A.I.

Ford recorded a $2.7 billion non-cash, pretax charge on its investment in Argo AI, which the company initially invested in starting in 2017. It later split its ownership of Argo AI with German automaker Volkswagen in 2019.

Ford CFO John Lawler said the company is winding down the operations to focus on advanced driver-assist systems such as its BlueCruise hands-free highway driving system and other operations that aren’t considered “fully autonomous.”

“It’s become very clear that profitable, fully autonomous vehicles at scale are still a long way off,” he told reporters. “We’ve also concluded that we don’t necessarily have to create that technology ourselves.”

Some of the roughly 2,000 employees for Argo AI are expected to be offered positions at Ford or Volkswagen, officials said. Volkswagen said in a statement that it will no longer invest in Argo AI.

Ford’s Q3

In pre-releasing some results last month, Ford attributed the lower-than-expected earnings to parts shortages affecting 40,000 to 50,000 vehicles as well as an extra $1 billion in unexpected supplier costs during the quarter.

Lawler on Wednesday said the company still expects to finish those vehicles and have them shipped to dealers by the end of the year.

The vehicles, largely high-margin pickups and SUVs, dragged down Ford’s North American profits. The company’s adjusted profit margin for the region was just 5%, down from 10.1% a year earlier.

Ford’s North American operations recorded adjusted earnings of $1.3 billion during the third quarter, down 46% from a year earlier. The automaker recorded earnings gains in Europe and South America, while its operations in China lost $193 million.

Ford’s overall revenue during the quarter, which includes its financial arm, was $39.4 billion, a 10% increase from a year earlier. Through the third quarter, the company’s year-to-date revenue was $114.1 billion, a 16% increase compared to that same time period in 2022.

Ford’s earnings come a day after crosstown rival General Motors significantly outperformed Wall Street’s earnings expectations but slightly missed on revenue. GM’s adjusted profit margin for the quarter narrowed to 10.2% compared with 10.7% during the third quarter of 2021, including 10% in North America.

– CNBC’s John Rosevear contributed to this report.

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