Ford Says ’23 Profits Show Dealer’s Ability to Adapt to Customers’ Needs

DEARBORN, Mich. – Ford+, in its first full year of operating with customer-centered business segments in 2023, demonstrated the strategy’s capacity to adapt to the wants and needs of customers and give them great experiences and value, while generating growth and profitability, officials said in a press release Tuesday.

“We’re the only company that gives customers such a wide range of choices – gas, hybrid and electric vehicles – made possible by our Ford+ plan and the talented team that’s carrying it out,” said President and CEO Jim Farley.  “Ford is creating a product, software and services powerhouse with huge potential for this year and the long haul.”

Ford’s fourth-quarter 2023 revenue was $46 billion, an increase of 4% from the same period a year ago on comparable vehicle volumes.  Net pricing was favorable.  A net loss of $526 million in the period was attributable to a $1.7 billion pretax, non-cash accounting loss related to the remeasurement of pension and other postretirement employee benefits plans.  Adjusted earnings before interest and taxes, or EBIT, totaled $1.1 billion.

For full-year 2023, revenue was up 11% to $176 billion.  Net income improved year-over-year to $4.3 billion; adjusted EBIT of $10.4 billion was essentially flat year-over-year and at the high end of guidance that Ford provided following ratification of its new contracts with the UAW in the U.S. and Unifor in Canada.

Profitability and cash flow from outside North America in 2023 represented a reversal from a combined loss of about $2 billion in 2020.  The improvement in those markets reflected benefits from lower capital approaches in China and elsewhere, and continued strength of the Ranger midsize pickup and Everest SUV.

Operating cash flow of $14.9 billion for all of 2023 was solid; adjusted free cash flow of $6.8 billion was significantly better than the company’s outlook of $5.0 billion to $5.5 billion.  Ford’s balance sheet remains strong, with nearly $29 billion in cash and more than $46 billion in liquidity at the end of the year.

CFO John Lawler said that the company’s robust cash flow and disciplined capital allocation enable vital investments in Ford+ while also returning value to shareholders – targeting distributions of 40% to 50% of adjusted free cash flow.

Accordingly, the company today declared a first-quarter regular dividend of 15 cents per share and a supplemental dividend of 18 cents per share.  The dividends are payable March 1 to shareholders of record at the close of business on Feb. 16.

Lawler said that Ford will improve capital efficiency by both selectively reducing investments and raising the bar on expected returns for initiatives that the company greenlights.

“The objective is to improve total adjusted return on invested capital from about 14% in 2023 to 20% over the next couple of years,” Lawler said.  “Simply ‘good’ isn’t good enough and investments are going to projects that have credible plans to deliver their targeted returns.”

EVs, according to the company, provide a great illustration.

“EVs are here to stay, customer adoption is growing, and their long-term upside is central to Ford+,” said Lawler.  “The customer insights we’re getting by being an early mover in electric pickups, SUVs and commercial vehicles are invaluable – especially as we’re developing next-generation EVs that are going to surprise customers and be profitable within a year of launch.”

However, with mainstream customer adoption of EVs happening at a slower rate than the industry expected, Ford said months ago that it’s deferring certain capital investments in EVs until they’re justified by demand and prospects for acceptable returns.

Full-Year 2024 Outlook
Ford Chief Operating Officer Kumar Galhotra said that the company entered 2024 with the talent and structure needed to correct quality and cost issues, contributing to growing fundamental strength and upside.

“We’re seeing green shoots of quality improvement, including in our new-product launches – with several important ones coming up this year,” Galhotra said.  “Across our global industrial system we’ve identified and will land $2 billion in cost reductions, in areas like material, freight and manufacturing – and we’re just getting started.”

Ford anticipates full-year adjusted EBIT of $10 billion to $12 billion and to generate $6 billion to
$7 billion in adjusted free cash flow, with capital expenditures of $8 billion to $9.5 billion.  The guidance presumes flat to modestly higher full-year U.S. industry volume, with overall lower vehicle pricing.  Upsides include beneficial pricing and mix from 12 months of sales of the all-new Super Duty that Ford Pro introduced during 2023.

The company’s total costs are expected to be flat year-over-year, the net of factors including the
$2 billion in industrial cost improvements, offset by higher expenses for labor and major product-refresh actions.

At a segment level, the outlook is for full-year 2024 EBIT of at least $8 billion to $9 billion from Ford Pro and about $7 billion to $7.5 billion from Ford Blue; an EBIT loss of $5.0 billion to $5.5 billion for Ford Model e; and earnings before taxes of about $1.5 billion from Ford Credit.