Yahoo Finance Ford earnings: Higher prices are 'impacting the consumer,' CFO says
Ford stock (F) is moving to the upside on Thursday after the automaker reported a beat on the top line and re-affirmed the bottom end of its full-year profit forecast.
However, the automaker is still seeing some headwinds coming in the form of economic uncertainty and higher rates, which are being reflected in its business.
“We are starting to see some signs that the inflation and the higher prices are impacting the consumer," Ford CFO John Lawler told Yahoo Finance Live (video above). "What we’re seeing is a narrowing of what consumers are willing to pay, or that a discount versus the suggested retail price is a bit higher."
He added that amid "the total macroeconomic environment — the inflation and what the consumer’s been facing — we’re starting to see that come through in some of the signs for us as a business."
Given the slowing economy, many consumers are trying different ways to obtain a new vehicle, even if that means creative financing.
“We’re also seeing consumers are looking for longer-term loans, 84 months and beyond, given that payments are higher," Lawler said. "They’re trying to keep that payment into a range they think is affordable."
Inflation costs 'hitting our business'
Inflation isn't just affecting Ford consumers — the company is also experiencing the impact of higher prices for components, materials, and other business costs.
Consequently, Ford warned last month that an additional $1 billion in higher costs would trim quarter profits, which came in at $1.7 billion on an adjusted EBIT (earnings before interest and taxes) basis for Q3.
“We have seen inflation costs hit our business," Lawler said. "We saw that in the third quarter. We’re continuing to see that. Labor's tight. Supply chains, ocean freight, and domestic freight are all very expensive right now. We're seeing it across the board."
Ford also noted in its third-quarter earnings report that it will be winding down its Argo AI autonomous driving joint venture. The company stated it would be taking a $2.7 billion non-cash, pretax impairment on its investment in Argo AI, with engineers and other employees being absorbed by Ford and its Argo AI partner, Volkswagen.
“When we looked at the business opportunity here, we saw that the arc to a scaled, profitable business was a long way off — 5 years-plus out,” Lawler said about the level 4 and level 5 autonomous services. “[Ford technologists] believe there’s a lot of hurdles that need to be crossed.”
Ford’s strategy for autonomous going forward will prioritize level 2 and level 3 autonomy, which will require some driver interaction and potentially be authorized for use on highways or similar types of roads. Some of these services are already offered with its Blue Cruise technology, which is currently at level 2.
And it’s not just the technology that has to be sorted, Lawler added. It’s also the number of vehicles needed to scale out an autonomous service across the country and depots that need to be built to service autonomous cars.
“It’s very expensive and is going to take a significant amount of capital to build out," he said. "It’s going to take quite a bit of time in our opinion."
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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