Automaker Ford weakens profit outlook amid price war, shares fall

Reuters: Ford Motor said on Monday it expects to hit the lower end of its full-year profit guidance, dropping the company's shares 5% in after-hours trading, as a price war hits the U.S. automaker's bottom line.

Ford expects to earn about $10 billion in earnings before interest and taxes this year, down from its prior range of $10 billion to $12 billion.

"No doubt, there's a global price war, and it's fueled by over-capacity, a flood of new EV nameplates and massive compliance pressure," CEO Jim Farley said on a call with analysts.

Rival General Motors beat Wall Street's expectations when it reported third-quarter results last week and said profit next year looks similar to this year.

Ford has also been weighed down this year by high warranty costs and problems with its supply chain, worsened by recent hurricanes, Chief Financial Officer John Lawler said.

Third-quarter profit fell less than expected, however.

The company reported third-quarter net income of $900 million, or 22 cents per share, down from 30 cents a year ago. Results were hurt by a $1-billion charge it took on cancelling production of a three-row electric SUV in August.

"Ford and other domestic automakers are facing headwinds from still-elevated interest rates and well-above-average inventory levels, which is leading to an increase in incentives and other measures, which should eat into margins," said CFRA Research analyst Garrett Nelson.

On an adjusted basis, Ford reported quarterly profit of 49 cents per share, compared to analysts' average estimate of 47 cents, according to data compiled by LSEG.

Ford’s commercial and gas-engine divisions posted combined EBIT of about $3.4 billion, fueling the company’s profits amid steep EV losses. The company's inventory was higher than its target range, as it ended the quarter with 91 days of gross stock and 68 days of dealer stock, Farley said.

Farley has made tough decisions about the company’s electric-vehicle lineup as competition from Tesla and Chinese automakers has intensified over the past year. Ford canceled the highly-anticipated three-row EV, which it dubbed a "personal bullet train," saying the vehicle could no longer be profitable in the timeline required.

Company executives have said that new vehicles need to be profitable within 12 months of launch to make its battery-powered business sustainable.

Ford's stock is down about 6% this year, falling less than Jeep-maker Stellantis' 40% decline as the latter struggles with slowing sales and profits in North America and announces management shuffling.