Ford Stock Falls 11% As Quality Issues and EV Operations Impact Profits

Financial Results

Shares in Ford fell 11 percent after the company revealed a rise in Q2 revenue, but a drop in net income. Ford blamed the disappointing financial results on the cost of its many recalls, which rose by $800 million. The firm’s electric division lost $1.1 billion but its commercial arm generated $2.6 billion profit.

Impact on Investors

Ford’s status as the biggest recaller in the industry isn’t only offputting to drivers thinking about buying one of its products, it’s also putting off investors. Ford stock fell by 11 percent after the company revealed disappointing financial results it blamed on rising warranty costs.

Recalls and Quality Issues

Ford has issued 31 recalls since the beginning of the year that affect 3.66 million vehicles. The next biggest quality villain, Tesla, has only issued eight recalls affecting 2.55 million cars, and Ford’s big rival GM only recalled 656,000 vehicles. The cost of remedying quality glitches post-registration grew by $800 million in Q2.

Challenges in EV Market

Warranty costs weren’t the only factor hurting Ford’s performance. The company’s Model e electric unit lost $1.1 billion in the previous three months as Ford, along with other automakers, struggled to deal with an EV market that hasn’t matured the way it hoped. That loss was at least down from the $1.3 billion loss achieved in the first quarter.

Future Plans

Ford is currently working on a small, affordable EV platform that it says will deliver a $30k electric car by the end of the decade, and has delayed plans to build bigger EVs. Last week it announced that it would build its highly profitable Super Duty combustion trucks in an Ontario plant previously earmarked for production of a battery-powered Explorer and Lincoln Aviator.

Overall Revenue and Divisions

Though Ford’s net income was down, overall revenue was up 6 percent to $47.81 billion, and some divisions had plenty to cheer about. The Ford Pro commercial arm generated a $2.6 billion profit with a 15.1 percent margin, and Ford Blue, which is Ford’s legacy car division handling ICE vehicles, was $1.2 billion in the black.

Source: CNBC