Ford Motor Co. reported strong first quarter earnings, including net income of $3.3 billion, which was the company’s best result in a decade.
The Dearborn, Michigan-based automaker also set a new record for adjusted EBIT with $4.8 billion on revenue of $36.2 billion, which was up 6% compared with the year ago period. The company also managed to turn around its operations outside North America during the quarter, reporting total automotive EBIT of $454 million — a $980 million improvement from the $526 million loss in Q1 2020.
Officials noted the positive numbers are the result of the company’s employees implementing the ongoing improvement plan that began with recently retired CEO Jim Hackett and accelerated by current chief Jim Farley.
“Our team is relentlessly executing our plan to turn around our automotive business so that we can create and deliver the high-value, always-on experience that our Ford and Lincoln customers deserve,” Farley said in a statement. “There’s no question we’re becoming a stronger, more resilient company.”
The results, which also highlight the company’s $31 billion in cash with overall liquidity of $47 billion, come as the automaker — and all others — continue to struggle with the after effects of the COVID-19 pandemic.
They were forced to play catch up on high demand vehicles like the Ford F-150 and its portfolio of sport-utility vehicles. That was compounded by the ongoing shortage of semiconductor chips plaguing the industry.
CFO John Lawler said in February the company could see overall production volume drop 10% to 20% because of the problem. It could also cut the automaker’s full-year adjusted EBITDA from $1 billion to $2.5 billion.
New guidance for 2021
Ford updated that guidance, accounting for expanded consequences from the semiconductor shortage, made worse by the recent supplier fire in Japan. While the issue is a significant headwind to the company, Lawler said Ford is taking definitive actions to address a range of possible outcomes.
Largely because of the additional effect of the supplier fire, Ford now expects to lose about 50% of its planned second-quarter production, up from 17% in the first quarter – again, implying that Q2 will be the trough of the issue.
Ford anticipates the flow of semiconductors from the Japan supplier to resume by the end of the second quarter — but, like many others in the industry, that the broader global semiconductor shortage may not be fully resolved until 2022. The company now assumes that it will lose 10% of planned second-half 2021 production.
All told, Ford now expects to lose about 1.1 million units of production this year to the semiconductor shortage. Accordingly, the company anticipates full-year 2021 adjusted EBIT to be between $5.5 billion and $6.5 billion, including an adverse effect of about $2.5 billion from the semiconductor issue. Adjusted free cash flow for the full year is projected to be $500 million to $1.5 billion.