Status: 03.02.2023 3:20 p.m
The US car company Ford is burdened by a loss in the billions, partly because of unsuccessful investments in electric cars. The management announces tough cuts – which may also affect Germany.
The bottom line is that the second-largest US automaker, Ford, made a loss of around $2.2 billion last year. That is a drop of 88 percent compared to the previous year: in 2021 the group still posted a profit of 17.9 billion dollars. Ford mainly blames special effects for the poor result, which would have pushed the group deep into the red.
These included billions in write-downs on the ailing electric car manufacturer Rivian and the AI company for autonomous driving, Argo AI. Together with Volkswagen, Ford started the Argo AI robot car project in 2019 before the two companies withdrew from the start-up at the end of October. The two companies each held 40 percent of Argo AI.
Billions are lost
Ford’s losses from investing in electric carmaker Rivian totaled €7.4 billion in 2022. The depreciation due to Argo AI was lower, but it is still about the high sum of $ 2.8 billion. The traditional US group Ford announced that it had almost completely divested itself of its Rivian shares. Amazon’s most recent quarterly results were also clouded by the downgrade of its stake in Rivian.
Ford’s sales rose to $158 billion last year compared to $136 billion in 2021. The carmaker sold a total of 4.2 million vehicles – slightly more than a year earlier.
“Everything is on the table”
Excluding the special items, interest and taxes, Ford’s adjusted operating income is $10.4 billion. The group clearly missed its self-imposed target of 11.5 billion dollars. Finance chief John Lawler announced “very aggressive” measures to reduce costs in production and in the supply chain. “Everything is on the table.”
Drastic cuts at the car company are also expected in Europe. “We should have done much better last year,” said CEO Jim Farley when presenting the business figures. The group left “about two billion dollars in profit on the table”. Farley’s criticism not only related to the final quarter, in which net profit fell by eleven billion to $1.3 billion, but to the entire past year.
General Motors is better off
Farley described the situation in drastic terms: “We have deep-rooted problems in our industrial system,” he said. “It was humiliating for both me and my team.” The problems spread to a variety of areas: “There is more to do in Europe. There is more to do in China. We have work to do here in the United States,” said CFO Lawler. “Our cost structure is not competitive and our quality is not where it should be.”
This puts Ford in a worse position than local rival General Motors. The number one in the USA had shone with an increase in operating profit in the fourth quarter and surprised analysts with an optimistic outlook.
“It was humbling for me and my team” – Ford CEO Jim Farley.
Image: picture alliance / ASSOCIATED PR
Losses widened in Europe
Everywhere in the auto industry, the corporations are burdened by the conversion to electromobility, billions of investments are necessary. At the same time, there are particular weaknesses. In Europe, where Ford plans to cut up to 3,200 engineering jobs, fourth-quarter pretax losses widened to $400 million, double the year-ago figure on flat sales.
The plant in Cologne is currently being converted for the construction of e-cars, and vehicles based on the MEB platform developed by Volkswagen will soon roll off the production line there. This saves Ford on development costs. This means that there is less work in the in-house development department, which costs jobs. Employee representatives now fear that thousands of jobs could be lost at the Cologne factory. GM withdrew from Europe years ago and sold its subsidiary Opel to what later became the Stellantis group.
Further job cuts open
Management did not say how deep the cuts at Ford will go. When asked if there would be more job cuts or plant closures, Lawler replied, “We have an opportunity in material costs. We have an opportunity in manufacturing. We have an opportunity in our entire supply chain. It’s really about the industrial platform, and a part of which productivity will be.” The manager left open whether factories should be closed.
Ford has already put the location in Saarlouis up for sale. Production of the Ford Focus 2025 is to be discontinued there. According to media reports, the European headquarters in Cologne is negotiating the sale of the Saarland plant with the Chinese carmaker BYD.
Are manufacturers threatened with a price war?
At the same time, quality problems continue to weigh on Ford. Lawler said the company needs to be able to reduce its warranty costs by $2 billion annually. Currently, however, it looks as if more costs could come to Ford: The US agency for road and vehicle safety NHTSA recently initiated a review of more than 1.8 million Explorer model vehicles. On the SUV model built between 2011 and 2019, parts of the windshield trim could come loose at higher speeds.
It is unclear whether Ford is getting involved in a price war, which would also be at the expense of profits. After Tesla’s massive price cuts, Ford slashed prices on the Mustang Mach-E SUV by as much as $5,900. The group also attracts customers with favorable financing conditions.
Should the price cuts spread further, industry observers expect a price war. Experts are reminded of the times more than ten years ago, when the US car companies drove each other into the crisis with a ruinous discount battle.