Strong Profit and Ambitious Plans
Ford reported that an unadjusted loss in Q4 increased to $2.79 billion, which translates into a loss of $0.70 a share, compared to the loss of $1.67 billion ($0.42 a share), during the same period in 2019.
On an adjusted basis, the business reported earnings per share (EPS) of $0.34 versus an expected loss of $0.07 per share. The company’s Q4 earnings were led by its US sales, while the European operations also reported profitability.
In 2020, the company suffered a $1.28 billion loss due to its global restructuring initiative as well as taking a hit from the COVID-19 pandemic. The business revenue in 2020 was $127.1 billion, 18% less than in 2019.
As for this year’s outlook, Ford’s chief financial officer (CFO) John Lawler said the carmaker expects to make between $8 billion and $9 billion in adjusted pretax profits and generate around $3.5 billion to $4.5 billion in adjusted free cash flow, without taking into account the worldwide shortage in semiconductor chips that could cause the company to lose $1 billion in earnings in 2021.
The company also said it plans to invest $29 billion in the development of its EV business and AI. The car manufacturer has previously announced its plan to invest $11.5 billion in its EV lineup through 2022. Now the company said it wants to double that figure, extending the timeline to 2025.
“The transformation of Ford is happening and so is our leadership of the EV revolution and development of autonomous driving,” CEO of the company Jim Farley said in a release.
Ford’s top executives said the company will spend $7 billion on AI and $22 billion on its EV segment, including the $7 billion that the carmaker has already invested since 2016. A business decision to double the EV and AI investment marks a “more aggressive” strategy to help reinforce its position in the mobility and transportation market, according to the company.
The auto business has also recently announced its plan to collaborate with Google to integrate its Android software into “millions” of cars, starting from 2023. All of recent Ford’s moves point to the company’s plan to pivot to a more digital future. The plan is designed to make the business a more serious EV competitor to Elon Musk’s Tesla.
Shares of Ford are trading about 3% higher today.
Ford reported much better-than-expected profit results for its Q4 while the car business doubled down on its investments into its EV market and AI.
About the Author
Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.