One-time warranty costs delivered an $800 million blow to Ford Motor Co’s second-quarter results report, which showed $1.8 billion in net income for the quarter.
Ford’s second-quarter revenue was $47.8 billion, up 6 percent year-over-year on a slight increase in wholesales. The automaker credits the benefits of a persistently fresh lineup of vehicles including momentum from the all-new F-150 pickup and record volumes of Transit commercial vans for the bump.
Warranty costs totaling between $1.5 billion and $2 billion, however, were up $700 million year-over-year and $800 million from the first quarter, according to Ford CFO John Lawler.
Ford President and CEO Jim Farley says he believes the quality issues that impacted the Q2 performance are behind the automaker for the most part and that other parts of the company are performing well.
“Ford+ is on track, our underlying quality is improving, and Ford Pro is showing the huge upside we’ve got in all our businesses,” Farley says. “Transparency and accountability from having separate teams focused on the needs of different customers are leading to better decisions and greater value for everyone.”
Lawler says the company’s efforts to lift the quality of new products are starting to pay off, with positive implications for customer satisfaction and Ford’s operating performance.
J.D. Power last month reported that Ford jumped 14 spots to No. 9 in the analytics company’s 2024 U.S. Initial Quality Study. Bronco Sport was named the best small SUV for initial quality; Ford’s Lincoln luxury brand was recognized for enhanced performance.
“Our own evaluations are showing similar quality gains,” Lawler says, “with declines in the number of incidents during the critical first three months in service, what the industry calls ‘3MIS.’”
Second-quarter wholesales and revenue for Ford Blue were up 3 percent and 7 percent, respectively, the latter to $26.7 billion. Truck volumes grew and overall pricing was strong. EBIT of $1.2 billion was down from the year-ago quarter, mostly because of the higher warranty costs.
Operating cash flow in the second quarter was $5.5 billion and adjusted free cash flow was $3.2 billion. At quarter-end, Ford’s balance sheet had close to $27 billion in cash and about $45 billion in liquidity.
The company declared a third-quarter regular dividend of 15 cents per share, payable Sept. 3 to shareholders of record at the close of business on Aug. 7.
Ford Pro’s second-quarter EBIT was $2.6 billion, an increase of 7 percent and a margin of 15 percent. Segment revenue was $17.0 billion, up 9 percent – three times the rate of growth in product shipments during the period.
Demand by commercial customers for Super Duty trucks and Transit commercial vans is outstripping production capacity. The ever-growing popularity of Super Duty and its strategic importance to Ford prompted the decision announced last week to add a third North America assembly plant to assemble the trucks.
Subscriptions to Ford Pro software were up 35 percent in the quarter and mobile repair orders fulfilled by the company’s fleet of about 2,000 service vehicles – and counting – more than doubled.
“The capabilities we’re developing in electric vehicles and software-enabled and physical services are wide competitive moats between Ford Pro and other companies,” says Farley. “For customers, from small businesses to the largest enterprises, they’re bridges to transforming their organizations at the same time we’re remaking ours.
“Over time, we’ll build out those same kinds of benefits for Ford Blue and Ford Model e customers and further distinguish us from other automakers, traditional and new ones.”
Sales of hybrid vehicles increased 34 percent and accounted for nearly 9 percent of all Ford vehicles worldwide. That’s two full points higher than in second-quarter 2023 with more hybrid models of the company’s most popular products on the way.
Ford Model e had an EBIT loss of $1.1 billion amid ongoing industrywide pricing pressure on first-generation electric vehicles and lower wholesales. Those factors more than offset about $400 million in year-over-year cost reductions in the segment. Ford Credit had second-quarter earnings before taxes of $343 million.
