Ford Motor Company — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are to Q1 2023 unless stated otherwise. Amounts are U.S. dollars. Filing date: April 24, 2024.
Financial performance
- Revenue: $42.8 billion, up 3% from $41.5 billion. Company revenue excluding Ford Credit was $39.9 billion; Ford Credit revenue was $2.9 billion.
- Profit: Net income attributable to Ford was $1.33 billion, down $425 million; diluted EPS was $0.33 versus $0.44. GAAP net income margin fell to 3.1% from 4.2%.
- Adjusted results (non-GAAP): Adjusted EBIT was $2.76 billion, down $616 million, and adjusted EBIT margin was 6.5% versus 8.1%. Adjusted diluted EPS was $0.49 versus $0.63.
- Cash flow: Operating cash flow was $1.4 billion, down from $2.8 billion. Company adjusted free cash flow was negative $0.5 billion versus positive $0.7 billion.
- Liquidity: At quarter-end, Company cash excluding Ford Credit was $25.1 billion and Company liquidity was $42.6 billion. Ford reported $34.7 billion of total cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and held-for-sale entities.
- Debt: Company debt excluding Ford Credit was $20.2 billion; Ford Credit debt was $129.3 billion. These are distinct businesses, with Ford Credit debt funding its financing operations.
- Other metrics: Capital spending was $2.1 billion. Inventories rose to $18.6 billion from $15.7 billion at year-end, primarily due to new vehicle launches and vehicles awaiting final quality review. The declared dividend was $0.33 per share, including a $0.18 supplemental dividend.
Material changes and segment results
- Ford Blue: EBIT fell to $905 million from $2.62 billion; revenue declined 13% to $21.8 billion and wholesales fell 11%. Ford cited lower volume and unfavorable mix, including fewer F-150s during a new model launch, as well as higher material and warranty costs.
- Ford Model e: EBIT loss widened to $1.32 billion from $722 million; revenue fell to $115 million from $707 million. Lower net pricing and the accrual impact for units in dealer stock at year-end were key factors. The segment cited about $90 million of volume-related battery and commodity obligations.
- Ford Pro: EBIT rose to $3.01 billion from $1.37 billion; revenue increased 36% to $18.0 billion and wholesales increased 21%. Higher volume, favorable mix, and pricing drove improvement, partly offset by higher costs, including warranty costs.
- Ford Credit: Earnings before taxes rose to $326 million from $303 million. Net receivables were $136 billion; U.S. loss-to-receivables was 47 basis points, up year over year but described as low by historical standards. Lower lease auction values weighed on results.
- Q1 pre-tax special-item charges were $873 million, mainly restructuring in Europe, the extended Oakville EV program changeover, and North American hourly employee buyouts. Ford also reported about $0.4 billion of EV-related expenses and about $0.3 billion of adjustments to revenue recognized in prior periods in Q1.
Outlook, risks, and contingencies
- 2024 guidance: Adjusted EBIT of $10–12 billion; adjusted free cash flow of $6.5–7.5 billion; capital spending of $8–9 billion; and Ford Credit EBT of about $1.5 billion. Segment outlook: Ford Pro EBIT $8–9 billion; Ford Blue $7–7.5 billion; Ford Model e loss $5–5.5 billion. Guidance was provided in the April 24 earnings release and assumes no material change in stated inflation, logistics, production, or macroeconomic assumptions.
- Management assumes U.S. industry sales of 16–16.5 million vehicles, lower industry pricing, a full year of the new Super Duty, and $2 billion of cost reductions in materials, freight, and manufacturing.
- Ford cited slower-than-anticipated EV adoption and pricing pressure; it may adjust EV spending, production, and launches. Risks also include supplier and raw-material availability, labor constraints, quality and warranty costs, competition, economic and geopolitical changes, interest and currency movements, and Ford Credit credit losses and lease residual values.
- Ford expects about $1 billion of 2024 restructuring charges and about $1 billion of contributions to funded pension plans. It has estimated offtake purchase obligations of about $3.9 billion and contingent obligations of about $6.9 billion through 2035, subject to conditions and forecasts.
- Legal and warranty exposure: Ford settled the Transit Connect customs matter in March 2024 for $365 million, paid during Q1. The filing estimates reasonably possible losses above accruals of up to about $0.2 billion for material matters, primarily indirect tax matters, and up to about $1.3 billion for material field service and customer satisfaction actions. Ford says ultimate litigation outcomes remain uncertain.
- Ford’s credit ratings had no agency rating actions since its 2023 Form 10-K; Moody’s Ford rating was Ba1 with a stable outlook, while Fitch and S&P rated Ford BBB- with stable outlooks.
Important facts for investors to verify
- Whether Ford Blue volume and margins recover after the F-150 launch, and whether Ford Pro’s elevated profitability is sustainable.
- Whether EV pricing, demand, and Model e losses develop in line with management’s $5–5.5 billion full-year loss outlook.
- Progress toward full-year adjusted EBIT and free-cash-flow guidance, including the planned $2 billion cost reductions and $8–9 billion capital spending.
- Inventory levels, quality-review delays, warranty and field-service costs, and the timing of associated cash payments.
- Ford Credit’s credit losses, lease residual values, funding access, and liquidity; also assess Ford Credit debt separately from the automotive company’s debt.
- Potential cash needs from restructuring, pension contributions, raw-material commitments, and legal or warranty contingencies.