Ford Motor Co., preparing to slash thousands of staffers to help fund its electric-vehicle future, reported second-quarter earnings that beat Wall Street estimates, as sales grew and car prices increased. Its shares rose 3.8 per cent in early trading Thursday.

Adjusted earnings rose to 68 cents a share, more than the 45 cents analysts predicted on average, Ford said Wednesday. Adjusted earnings before interest and taxes more than tripled to US$3.7 billion, well above the US$2.37 billion analysts expected. That performance also compared favorably with Detroit-based rival General Motors Co.’s second-quarter adjusted profit of US$2.34 billion. 

Both carmakers are racing to catch up with EV market leader Tesla Inc. by launching a slew of battery-powered models. Ford attributed its gains in part to high demand for its electric Mustang Mach-E crossover SUV, F-150 Lightning pickup and E-Transit commercial van. 

Ford also reiterated its 2022 earnings guidance of US$11.5 billion to US$12.5 billion before interest and taxes. That would represent a gain of 15 per cent to 25 per cent over 2021’s profit. In another sign of confidence, the company raised its quarterly dividend by 50 per cent to 15 cents a share. 

Ford shares pared a gain on Thursday of as much as 6.8 per cent to trade up 3.8 per cent to US$13.69 as of 9:46 a.m. in New York. The stock is down about 34 per cent this year.

BELT-TIGHTENING

Ford also signaled belt-tightening is underway to keep costs in check as it spends billions on EV battery and vehicle factories. Ford Chief Financial Officer John Lawler said Ford has begun streamlining efforts as part of a “sweeping change” in strategy to make the transition to electric vehicles. He declined to comment on specifics about headcount reductions.

“We’re focused on our costs and our cost reductions for transforming the company and those will have benefits if we do head into a potential recession,” Lawler said on a call with reporters. “We’re looking at simplifying the business, transforming the business, growing in some areas, cutting in other areas.”

Chief Executive Officer Jim Farley is engineering a wrenching transformation by spending US$50 billion through 2026 to pump out 2 million electric vehicles annually, up from just over 27,000 last year. To finance those ambitions, Farley aims to lift profit from Ford’s traditional gas-burners, like the Bronco sport-utility vehicle, by cutting US$3 billion in costs and eliminating as many as 8,000 jobs, according to people familiar with the plans.

During the second quarter, the automaker bucked an industrywide decline by nudging up US sales by 1.8 per cent. Ford’s automotive revenue in the period soared to US$37.9 billion, beating the US$34.5 billion analysts expected, as vehicle prices increased.

Ford attributed its robust revenue to increased sales volume as well as “favorable pricing and vehicle mix,” a reference to higher sticker prices on its fattest profit-margin SUVs and trucks. In the April to June period, the average price consumers paid for Ford models rose 10 per cent to US$51,995, boosting profit even as dealers’ inventory remained tight due to the chip shortage, according to researcher Cox Automotive.

Those lofty prices may not last as a bottleneck on semiconductor supplies eases and inventories recover. Lawler said Ford expects to see a “moderation in pricing” as vehicle availability increases from the current paltry 14-day supply.  

HOME MARKET STRENGTH

Ford’s home market operations in North America continued to drive performance, with earnings before interest and taxes of US$3.27 billion, a huge gain from the US$192 million last year. The company said nearly all of its 2022 model-year vehicles were sold out and that customer traffic in its showrooms is brisk. 

“Ford is having success on the product side,” David Whiston, an analyst with Morningstar Inc. who rates the company a buy, said before the results were announced. “They just need to do a better job on cost, including warranty cost and making the company more fit. It sounds like those plans will be executed fairly soon.”

In China, the world’s largest auto market, Ford has yet to gain much traction. The company posted a US$121 million loss before interest and taxes, nearly unchanged compared from the US$123 million loss last year. Ford’s sales in China plunged 22 per cent during the quarter to about 120,000 vehicles as pandemic-related restrictions and lockdowns disrupted business.

But the automaker swung to a US$10 million profit before interest and taxes in the second quarter in the European market, compared with a US$284 million loss a year earlier. It cited strength in its commercial vehicle business for the turnaround.