Dearborn’s Ford Motor Co. ended 2020 with $36 billion in revenue and plans to invest $22 billion in electric vehicles and $7 billion in autonomous vehicles.
“The transformation of Ford is happening, and so is our leadership of the EV revolution and development of autonomous driving,” says Jim Farley, president and CEO. “We’re now allocating a combined $29 billion in capital and tremendous talent to these two areas, and bringing customers high-volume, connected electric SUVs, commercial vans and pickup trucks.”
In the fourth quarter, the company generated $1.9 billion in adjusted free cash flow and ended the year with sequentially higher cash (nearly $31 billion) and total liquidity (almost $47 billion).
Quarterly company adjusted earnings before interest and taxes were $1.7 billion, up from $485 million the previous year, and an adjusted EBIT margin of 4.8 percent from the previous year.
The company plans to invest about $7 billion on autonomous vehicles over 10 years through 2025 as part of its Ford Mobility initiatives. During the fourth quarter, Argo AI’s algorithm enabled address-to-address autonomous deliveries of fresh produce and school supplies through a charitable goods pilot in Miami. Separately, Ford’s Spin subsidiary improved its per-trip economics in 2020 while winning a majority of the scooter permits applied for from U.S. municipalities.
Ford said it continues to work on a plan to turn around its automotive business and improve profitability.
Financial objectives include maintaining a strong balance sheet and discipline in allocating capital; deriving greater benefits from the ongoing redesign of Ford’s global business and its products and services portfolio; targeting an 8 percent adjusted EBIT margin and healthy adjusted free cash flow, increasing the company’s financial flexibility; and investing in strategic areas such as electric vehicles, connected services, and autonomous vehicles.
The company improved quarterly operating results in every one of its regional auto businesses along with Ford Credit. Cumulative EBIT outside of North America was $666 million better than a year earlier.
North America EBIT was up 53 percent to $1.1 billion. The increase was attributable to yield management and the absence of UAW contract ratification costs in the quarter, offset by lower vehicle volumes because of manufacturing changeovers at two plants to introduce the 2021 F-150. Under the UAW-Ford collective bargaining agreement, the company’s North America pre-tax profits will generate about $3,625 in profit-sharing payouts per eligible UAW-represented employee on a full-year basis. The payments will be made in March.
With Ford’s North America portfolio transformation nearly complete, 97 percent of its product mix in the region now comprises trucks, vans, and utility vehicles.
In Europe, Ford posts $414 million in EBIT – its highest quarterly profit in the region in more than four years – and an EBIT margin of 5.8 percent. Through the first phase of restructuring, the company has reduced its annual structural costs by $1.1 billion. All three business focus areas – commercial, passenger, and import – were profitable in the quarter.
Retail sales in China were up 30 percent as the company achieved its fourth straight quarter of share growth. SUVs accounted for 36 percent of Ford’s mix, with commercial vehicles representing 45 percent. The business cut its EBIT loss 68 percent to $66 million, the third consecutive quarter of yearly improvement.
Ford reduced its EBIT loss in South America for the fifth straight quarter, then in mid-January took action to counter persistently weak industry demand and other regional economic factors. Ford Brazil decided to cease manufacturing at its three in-country plants. The company will now serve customers across South America with products sourced from other markets.
Combined shipments by the International Markets Group were up nearly 2 percent compared with an industry decline of 3 percent. With the exception of India, where it experienced an EBIT loss of $62 million, it was profitable in the fourth quarter. India’s loss is an improvement from the previous year’s loss of $174 million. In December, Ford and Mahindra jointly decided not to pursue their previously announced joint venture in India.
Ford Credit fourth quarter earnings before taxes were $912 million, up 48 percent.
The company will invest at least $22 billion in electrification through 2025, nearly twice what the company had previously committed to electric vehicles.
“We are accelerating all our plans – breaking constraints, increasing battery capacity, improving costs, and getting more electric vehicles into our product cycle plan,” Farley said. “People are responding to what Ford is doing today, not someday.”
The Mustang Mach-E, which began delivering in the fourth quarter, will be followed by the first E-Transit commercial van late this year and an all-electric F-150 pickup in mid-2022. Electric vehicles are expected to be fundamental to the Lincoln luxury brand and the Transit commercial lineup.
Ford announced a six-year partnership with Google earlier this week. The companies are establishing Team Upshift to unlock personalized consumer experiences and create and make the most of data-driven opportunities.
John Lawler, CFO, says the company was on course to earn $8 billion-$9 billion in adjusted EBIT, including a $900 million noncash gain on its investment in Rivian, and generate $3.5 billion-$4.5 billion in adjusted free cash flow in 2021. However, the global semiconductor shortage is creating uncertainty across multiple industries and will influence Ford’s operating results.
“The semiconductor situation is changing constantly, so it’s premature to try to size what availability will mean for our full-year performance,” he says. “Right now, estimates from suppliers could suggest losing 10 percent-20 percent of our planned first-quarter production.”
In related news, Ford is donating more than 40 laptops in the Girls in Engineering Academy in an effort to support underserved students in the program and boost STEM education.
Developed by The Engineering Society of Detroit in Southfield, the program aims to prepare and encourage middle school girls, particularly those in metro Detroit, to enter college and study engineering at a level competitive with other students. The program launched in 2017 and is now seeing its first class of middle school members enter high school.
“Many students simply do not have access to the tools and support they need to further their education in math and science, especially as the pandemic persists,” says Randy Strawsine, STEM lead at Ford. “We’re proud to donate these laptops to the Girls in Engineering Academy and strengthen our commitment to STEM education, especially for underserved students throughout Detroit.”
In response to the COVID-19 pandemic, the academy has moved its students to a virtual setting. The laptop donation will remove barriers to remote learning. The program recruits about 30 girls every year.