Ford posts $3.1 billion loss for Q1 but signals supply-chain improvements ahead

Ford Motor Co. had what executives dubbed a "mixed" performance in the first quarter, but the automaker signaled it sees supply-chain constraints improving in the second half of the year.

Still, executives said supply-chain management will be an even more pressing issue as the automaker electrifies more of its lineup — with the raw materials needed for electric-vehicle batteries being a significant focus.

The Dearborn automaker posted a $3.1 billion net loss on revenue of $34.5 billion Wednesday. That's down from the first quarter of 2021, when it reported a $3.3 billion profit on $36.2 billion in revenue.

The net loss was due to a $5.4 billion loss on its investment in EV startup Rivian Automotive Inc., whose stock has faltered in recent months amid production challenges. Ford's stake was valued at $5.1 billion at the end of March, down from $10.6 billion at the end of 2021.

Meanwhile, Ford reported $2.3 billion in adjusted earnings before interest and taxes — a financial metric that does not include special items such as the stake in Rivian. Adjusted EBIT was down from $3.9 billion in the same period last year.

Despite the supply-chain and production challenges the automaker faced in the first quarter, it maintained its full-year guidance of $11.5 billion to $12.5 billion in adjusted EBIT. The company expects chip supplies to improve in the second half and for full-year vehicle wholesale volumes to increase 10% to 15% over 2021.

Meanwhile, crosstown rival General Motors Co. on Tuesday reported a $2.9 billion profit for the first quarter, down slightly from the $3 billion it reported a year ago. 

GM executives pointed out high commodity and logistics costs, which totaled about $1 billion in Q1.

The Detroit automaker, too, signaled it sees semiconductor chip supplies improving, and reaffirmed its guidance of adjusted earnings in the range of $13 billion to $15 billion for the year.

Stellantis NV reports its revenues and shipments on May 5, and will report first-half earnings July 26. 

Supply-chain woes

Underscoring the supply-chain issues that held back production in the first quarter, Ford's U.S. sales were down 17.1% to 432,133 vehicles, according to data from Edmunds.com Inc.  

The automaker said that the chip shortage constrained production and shipments in January and February, but that it saw improvements in March. And more profitable products in North America — where Ford reported EBIT of nearly $1.6 billion — like the F-Series truck line took a disproportionate hit, executives said. In all, the automaker said it has some 53,000 assembled vehicles awaiting components containing semiconductor chips.

"Demand for our products last quarter exceeded our ability to produce them — and obviously, the big reason for that was the global shortage of semiconductors," Chief Financial Officer John Lawler told reporters Wednesday. "We didn't have enough chips to build the vehicles customers wanted and couldn't take full advantage of our manufacturing capacity."

The company, he said, is doing everything it can to break production constraints and meet demand. 

Underscoring the demand situation the company is in: Lawler said Ford's existing customer orders at the start of the second quarter was equivalent to roughly $17 billion in revenue. And the company had nearly 400,000 customer orders at the end of the quarter.

Continued high demand throughout the myriad supply-chain disruptions the global auto industry has endured over the last two years has pushed up prices. Ford's average transaction price in the U.S. was $49,343, up 3.1% year-over-year, according to Edmunds.

Lawler said strong pricing has helped the company mostly offset the inflationary pressures it's seen to date, but the company estimates commodity costs will be up about $4 billion year-over-year this year.

Batteries

Lawler also acknowledged the company has seen "considerable" inflationary pressures on the raw materials needed to make EV batteries, such as lithium and nickel — and executives said raw material supplies will be a crucial issue as Ford goes further down the electrification path.

"It's very clear to us that battery capacity is the key unlock to our EV aspirations and to propel our growth in the future," Farley told investment analysts. "We're in good shape in the near term. In the medium- and long-term, securing raw materials, processing, precursor and refinement, and setting up battery production here in the U.S. and around the world is a big work statement for us. Expect a lot of news from Ford in the future related to the vertical integration of our EV business."

Executives also highlighted battery chemistries as a key area of focus, with Farley saying that chemistry would be "a really key part of our protection against commodity price increases."

Doug Field, a former Apple and Tesla executive who now serves as chief EV and digital systems officer for Ford's EV business unit, said that lithium iron phosphate, or LFP, battery cells "will be a part of our future."

LFP battery cells don't require nickel or lithium, materials that are in high demand.

EV market leader Tesla Inc. is moving to LFP battery cells in its products, and Rivian recently moved to do the same, CNBC reported.

"We're also looking at other chemistries that give us an opportunity to be less dependent on materials that everyone seems to be fighting over in the market," said Field.

Meanwhile, asked what message he would have for the metal and mining industry, Farley signaled Ford is open to collaboration.

“We need to work together and find good deals," he said. "We know what we’re looking for. We’re focused on lithium and nickel. We want to do smart deals that work for them and for us. And No. 2, we want to move some of the process into North America. And we’re willing to invest capital to move the processing, precursor work from overseas to North America for a variety of reasons.”

Ford's stock closed up 0.95% to $14.85 per share Wednesday. It was trading up after hours following the earnings report.

Investment research firm CFRA Research maintained its "strong buy" opinion on Ford stock Wednesday, but cut its 12-month price target to $22 per share "to account for a more bearish discretionary spending outlook and the impact of rising interest rates," analyst Garrett Nelson wrote in a note.

"With F-150 Lightning deliveries expected to commence imminently ... and a favorable view of the company's direction under CEO Jim Farley," he added, "the stock remains one of our top auto picks."

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski