Ford Motor Q3 Earnings to Take $1B Cost Hit

In an attempt to shape expectations, Ford Motor late today again affirmed its expectation for full-year 2022 adjusted earnings before interest and taxes of between $11.5 billion to $12.5 billion. This is in the face of parts shortages, as well as higher payments made to suppliers to account for the effects of inflation.

However, the short term is grimmer. Based on recent negotiations, inflation-related Q3 supply costs will be ~$1.0 billion above plan. Ford predicts a Q3 adjusted EBIT of between $1.4 billion and $1.7 billion. In the slight of hand of automaker accounting practices, revenue is booked when a vehicle is shipped to a dealer, not sold to the end user.

While some of the problems are of Ford’s own creation, completing affected vehicles will shift some revenue and earnings to Q4. Now Ford says that 40,000 to 45,000 vehicles – comprised largely high-margin trucks and SUVs – will be completed and sold to dealers during Q4.

Ford quality problems and ongoing recalls remain an expensive and reputation damaging trends. During Q2 of 2022, it had revenue of $40.2 billion because of a 35% increase in wholesale shipments together with “favorable pricing and vehicle mix.” Operating cash flow was $2.9 billion and adjusted free cash flow was $3.6 billion, with automotive EBIT of $3.3 billion. Ford ended the quarter with $29 billion in cash, $45 billion in total liquidity.

However, Ford’s Q2 net income was $667 million, a margin of 1.7%, which included a mark-to-market loss of, gulp, $2.4 billion on Ford’s stake in Rivian. Ford is also in the process of slashing costs under its latest restructuring plan. General Motors Co. (NYSE: GM) reported Q2 net income attributable to stockholders of $1.7 billion and EBIT-adjusted of $2.3 billion. (AutoInformed: GM Q2 Earnings at $2.3B Off -$1.1B YoY) Ford Motor intends to announce full Q3 2022 financial results  on Wednesday 26 October. It will provide more information about expectations for full-year performance at that time.