Ford Motor Co.
Ford executives have dialed down production of the Mach e as part of a plan to trim EV losses.

Ford Postpones $12B in EV Investments

Oct. 27, 2023
Third-quarter sales at the company’s Model e division were up 44% year over year but losses have ballooned.

Ford Motor Co. executives are pushing out about $12 billion in planned electric-vehicle investments as they adjust to flagging demand for EVs and push harder on fixing the company’s cost and quality problems.

Speaking to analysts after reporting Ford’s third-quarter results, President and CEO Jim Farley and CFO John Lawler said they are looking to match the company’s large spending on EV capacity with a market that has become “more challenging” than expected, in significant part because some consumers are balking at the higher prices many manufacturers are demanding.

The spending retrenchment includes, among other things:

  • Slowing production of the Mustang Mach-E
  • Delaying (with joint-venture partner SK On) the construction of a second BlueOval SK battery plant in Kentucky
  • Studying how and whether to move ahead at all with the $3.5 billion BlueOval Battery Park Michigan plant

“We’ve made this decision to push out $12 billion of capital expenditures but it doesn't mean that we’ll actually go ahead and pull the trigger on it if we don’t need to,” Lawler said. “There’s a lot that’s going to change between now and ’26 and ’30 and we’re going to adjust appropriately.”

Dearborn-based Ford posted a third-quarter net profit of $1.2 billion, which reversed a year-ago $827 million loss that was due in part to the company writing down its investment in Argo AI. Revenues climbed 11% to $43.8 billion even though wholesale shipments were flat, but adjusted free cash flow fell to $1.2 billion from $3.6 billion.

Ford Model e, the company’s electric-vehicles division, saw its finances worsen considerably from the same period of 2022 because of greater capital investments. While sales jumped 44% to about 36,000 during the quarter, revenues rose only 26% to about $1.8 billion and the unit’s earnings before interest and taxes topped $1.3 billion. That was more than double the Q3 2022 loss and works out to a loss of roughly $36,000 per vehicle.

Lawler called the pricing pressures on EVs this year—much of it spurred by several price cuts at Tesla—“incredible” and Farley added that the price gap between EVs and internal-combustion-engine cars will continue to narrow. Ford’s work on its second- and third-generation EVs, Farley said, will go a long way to helping the company navigate that trend because it is reducing complexity and increasing vertical integration.

“We […] remain bullish on Model e and our EV future but, clearly, the market is a moving target,” Farley said. “I’m optimistic because customers are smart and are rational, and for many of them, EVs are a great choice.”

The Model e division has lost $3.1 billion year to date, more than the full-year number Farley and Lawler expected in May. But the company’s two other car groups—Blue for gas and hybrid vehicles and Pro for commercial vehicles and services—are outperforming previous projections. Blue produced $1.7 billion in EBIT during the third quarter, lifting its year-to-date profits to $6.6 billion. In May, Farley and Lawler had guided analysts to expect $7 billion in EBIT for the full year.

The Pro group, meanwhile, has gained nearly two percentage points of market share so far in 2023 and has in the past year grown by nearly 50% (to 476,000) the number of subscribers to its analytics and other tech services. Through the first nine months, the division’s EBIT was $5.4 billion; six months ago, Ford’s leaders expected that number to be $6 billion for all of 2023.

Shares of Ford (Ticker: F) were down nearly 9% to about $10.35 in midday trading Oct. 27, the day after Farley and Lawler reported earnings and also said they are withdrawing their full-year guidance as they assess the financial impact of Ford’s tentative new contract with the United Auto Workers. Over the past six months, they have fallen roughly 10%, cutting the company’s market capitalization to about $43 billion.

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