Ford accelerates investment plan for EVs and self driving vehicles, reports loss

Ford Motor Co on Thursday more than doubled the amount of money it plans to invest on electric and autonomous vehicles, to $29bn (roughly R434,596,900,000), even as it posted a fourth-quarter net loss of $2.8bn (roughly R41,961,080,000).

The No 2 US car maker also said the global semiconductor chip shortage could lead to a 10% to 20% loss in first-quarter production, resulting in a potential hit to operating earnings of $1bn to $2.5bn (roughly R14,986,100,000 to R37,471,275,000). But its shares gained 1.5% in after-hours trading as the fourth-quarter operating results and 2021 profit forecast were above Wall Street's expectations.

“If EVs continue to quickly gain favour, especially with commercial customers, we want to be clear that we will not cede ground to anyone,” CFO John Lawler told reporters on a conference call.

Ford said it was “doubling down” on connected electric vehicles and said it will invest $22bn (roughly R329,747,220,000) in electrification up to 2025, nearly twice what it had previously committed to EVs. Ford also said it would invest $7bn (roughly R104,919,570,000) in self-driving, or autonomous, technology development over 10 years up to 2025 – $5bn (roughly R74,941,100,000) of that from 2021 forward.

“We are accelerating all our plans,” CEO Jim Farley said, including increasing battery capacity and adding more electric vehicles in its future portfolio.

He said on a conference call with analysts that the $22bn investment does not include potential investment in battery production, whether at Ford itself or via a joint venture. He added that Ford will have more announcements soon concerning its EV partnerships.

Farley told Reuters last year that Ford was considering making its own battery cells as sales volumes of electric vehicles rise globally.

Ford previously committed to invest $11.5bn (roughly R172,364,530,000) in electrification, including petrol-electric hybrid vehicles, up to 2022. That included the launch of the Mustang Mach-E EV crossover, and electric versions of the F-150 pickup and Transit van.

A Ford spokesperson said the $22bn includes hybrid vehicles, but the commitment is “overwhelmingly” on EVs.

US rival General Motors Co has said it will spend $27bn (roughly R404,679,240,000) by 2023 on electric and autonomous vehicles, a total that does not include hybrids. It said it plans to offer 30 EVs globally by 2025 and is targeting topping annual sales of 1 million EVs in the US and China by 2025.

Asked whether Ford would match GM's announcement that it aspires to stop selling petrol-powered light vehicles by 2035, Lawler told reporters Ford is focused on selling high-volume EVs now, a possible reference to GM's initial EV product launches being lower-volume, higher priced models.

For 2020, Ford reported a net loss of $1.3bn (roughly R19,484,556,000). It had previously said it expected a full-year profit of between $600m (roughly R8,992,872,000) and $1.1bn (roughly R16,487,559,000).

Ford had a loss in the fourth quarter of $2.8bn (roughly R31,476,249,000), or 70 cents (roughly R10,49) a share, compared with a loss of $1.7bn (roughly R25,479,005,000), or 42 cents (roughly R6,29) a share, a year earlier. The quarter included several previously disclosed charges related to a recall, remeasurement of pensions and the closure of the company's Brazilian manufacturing operations.

Excluding the charges, Ford's operating profit was 34 cents (roughly R5,10) a share, easily topping the 7-cent (roughly R1,05) loss analysts polled by Refinitiv had expected.

The Dearborn, Michigan-based company projected operating earnings would climb to $8bn to $9bn (roughly R119,902,320,000 to R134,890,110,000) in 2021, compared with $2.8bn last year (roughly R41,965,812,000). Credit Suisse analyst Dan Levy said in a research note that the forecast was above Wall Street consensus expectations for $6.9bn (roughly R103,410,300,000).

The forecast includes a $900m (roughly R13,488,300,000) non-cash gain on Rivian, the electric vehicle start-up in which Ford has invested, but does not include the effect of the ongoing global semiconductor shortage. Farley said the Rivian investment was strategic, despite Ford previously shelving a vehicle based on a Rivian platform.

In Covid-19 pandemic-ravaged 2020, Ford's total revenue fell to $127bn (roughly R1,903,349,000,000), from $156bn (roughly R2,337,839,400,000) in 2019.

Ford ended the quarter with nearly $31bn (roughly R464,570,650,000) in cash and $47bn (roughly R704,349,050,000) of liquidity, compared with almost $30bn (roughly R449,584,500,000) and more than $45bn (roughly R674,252,550,000) respectively in the previous quarter.

Its operating margin in the fourth quarter was 4.8%, compared with a full-year target of 8%.