# Ford posts lower profit, issues downbeat outlook; shares drop
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-03
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Ford Motor Co Quarterly Profits Fall Amid Supply Chain
Meta Description: Ford Motor Co reported a decline in profits due to chip shortages, supply chain issues, and production instabilities. CEO Jim Farley expressed disappointment
URL: https://financedigest.com/ford-posts-lower-profit-issues-downbeat-outlook-shares-drophtml

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By Joseph White and Paul Lienert

DETROIT (Reuters) -Ford Motor Co on Thursday said quarterly profits fell and the automaker predicted a difficult year ahead, sending its shares down after the bell as investors were disappointed following this week’s robust report from rival General Motors Co.

Ford blamed chip shortages and other supply chain issues and production “instabilities” that raised costs, along with lower-than-expected volumes. Ford [shares dropped more than 6% in after-market trading](https://www.financedigest.com/social-trading-is-the-new-way-that-gen-z-are-getting-their-share-of-the-pie.html "Social Trading is The New Way That Gen Z Are Getting Their Share of The Pie").

We should have done much better last [year,” Ford CEO](https://www.financedigest.com/a-network-of-networks-will-ceos-be-replaced-by-ai-in-the-next-10-years.html "A Network of Networks: Will CEOs be Replaced by AI in the Next 10 Years?") Jim Farley said in a statement. “We left about $2 [billion in profits](https://www.financedigest.com/softbanks-vision-fund-posts-2-billion-profit-share-weakness-casts-shadow.html "SoftBank’s Vision Fund posts  billion profit, share weakness casts shadow") on the table that were within our control.

In an analyst call, Farley added: “We have deeply entrenched issues in our [industrial system,”](https://www.financedigest.com/is-your-erp-system-industry-4-0-compatible.html "Is your ERP system Industry 4.0 compatible?") saying “this has been humbling for both me and my team.

Ford forecast flat to [lower pre-tax profits](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens") for 2023, as well as greatly reduced free cash flow, and signaled an accelerated effort to slash costs.

GM shares jumped on Tuesday, and Ford’s shares rose slightly after GM reported [higher net income for the fourth](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain") quarter, forecast stronger-than-expected earnings for 2023 and said it would cut $2 billion in costs.

In a briefing late Thursday, Ford Chief Financial Officer John Lawler said “2023 is a pivotal [year for us as we reshape](https://www.financedigest.com/2020-the-paradoxical-year-that-has-reshaped-the-future-of-motor-insurance-and-related-sectors.html "2020: The paradoxical year that has reshaped the future of motor insurance and related sectors") the company.” Some aspects of Ford’s overhaul are “lagging and need more work,” he said.

In the simplest terms, we need to improve quality and [lower costs](https://www.financedigest.com/bmw-bets-on-design-and-recycling-not-mining-to-lower-battery-costs.html "BMW bets on design and recycling, not mining, to lower battery costs") now,” Lawler reporters.

He also predicted a [“mild” recession](https://www.financedigest.com/low-use-of-shortened-work-hours-points-to-mild-german-recession-ifo.html "Low use of shortened work hours points to mild German recession – Ifo") for the U.S. market in 2023, compared with a more [upbeat economic forecast](https://www.financedigest.com/publisher-bloomsbury-casts-upbeat-forecast-says-books-affordable-pastime.html "Publisher Bloomsbury casts upbeat forecast, says books ‘affordable pastime’") by GM.

Lawler said Ford’s fourth-quarter [sales volumes were 100,000 vehicles short](https://www.financedigest.com/youtube-in-challenge-to-tiktok-to-give-shorts-creators-45-of-ad-sales.html "YouTube in challenge to TikTok to give Shorts creators 45% of ad sales") of expectations. He blamed most of that on the company’s inability to get enough [chips for its cars](https://www.financedigest.com/upset-by-high-prices-gms-cruise-develops-its-own-chips-for-self-driving-cars.html "Upset by high prices, GM’s Cruise develops its own chips for self-driving cars"). Lawler said it was “hand-to-hand combat” to get [chips and capacity was still constrained for the larger, older chips used in the auto sector](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors").

He said Ford faces $5 billion in higher [costs this year](https://www.financedigest.com/commonenergy-mistakes-costing-homeowners-hundreds-of-pounds-each-year.html "Commonenergy mistakes costing homeowners hundreds of pounds each year"), but has kept the mid-range of its profit guidance flat with 2022. Ford had [previously set](https://www.financedigest.com/uk-economy-set-for-smaller-hit-in-2023-than-previously-feared-imf.html "UK economy set for smaller hit in 2023 than previously feared – IMF") a target of cutting $3 billion in costs from operations, but Lawler said the company will be “very aggressive” in reducing expenses in its manufacturing and supply chain operations, adding, “Everything’s on the table.

[Quality issues](https://www.financedigest.com/voice-quality-matters-quarter-of-employees-working-from-home-still-experiencing-regular-connectivity-issues.html "Voice Quality Matters: Quarter of Employees Working From Home Still Experiencing Regular Connectivity Issues") continued to drag Ford’s results. Lawler said Ford should be able to reduce warranty [costs by $2 billion](https://www.financedigest.com/australias-nuclear-submarine-plan-to-cost-up-to-245-billion-by-2055-defence-official.html "Australia’s nuclear submarine plan to cost up to 5 billion by 2055 -defence official") annually.

Lawler said Ford intends to return 40-50% of free cash flow to [shareholders this year](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row"). But the company expects adjusted free cash flow to [fall to about $6 billion in 2023 from $9.1 billion last year](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year").

Ford [expects full-year adjusted pretax earnings of $9 billion](https://www.financedigest.com/factbox-big-banks-expected-to-rack-up-more-than-1-billion-in-fines-for-whatsapp-use.html "Factbox-Big banks expected to rack up more than  billion in fines for WhatsApp use") to $11 billion. The company’s 2022 adjusted profit of $10.4 billion was short of Ford’s forecast at the end of the [third quarter](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter") for $11.5 billion.

Fourth-quarter net income fell to $1.3 billion, from $12.3 [billion in the year-earlier period](https://www.financedigest.com/automotive-body-in-white-sales-at-3-4-cagr-over-the-forecast-period-from-2021-to-2031-reaching-us-59-7-billion-in-2021.html "Automotive Body in White sales at 3.4% CAGR over the forecast period from 2021 to 2031, reaching US$ 59.7 billion in 2021"). Revenue climbed to $44 billion, from $37.7 billion the [previous year](https://www.financedigest.com/glastons-interim-report-1-january-31-march-2018-orders-received-grew-23-comparable-operating-profit-at-previous-years-level.html "Glaston’s Interim Report 1 January – 31 March 2018: Orders received grew 23%, comparable operating profit at previous year’s level"). Adjusted pretax earnings were $2.6 billion, compared with $2.0 [billion last year](https://www.financedigest.com/over-150-new-business-jets-could-be-delivered-to-europe-this-year-worth-an-estimated-5-billion.html "Over 150 New Business Jets Could Be Delivered To Europe This Year Worth An Estimated $ 5 Billion").

(Additionl reporting by Ben Klayman in Detroit; Editing by David Gregorio)


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