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    Ford Motor Co (F)

    New Share Buyback Program

    Business Description

    Ford Motor Company is a global automotive leader, operating through three main customer-centered business segments: Ford Blue, Ford Model e, and Ford Pro. The company is renowned for engineering iconic gas-powered, hybrid, and electric vehicles, as well as providing comprehensive services and software for commercial customers . Additionally, Ford offers financial services through Ford Motor Credit Company, enhancing customer loyalty and generating new revenue streams .

    1. Ford Blue - Engineers iconic gas-powered and hybrid vehicles, significantly contributing to the company's revenue and profitability .
    2. Ford Pro - Serves commercial customers with a comprehensive suite of vehicles, services, and software, achieving substantial growth in revenue and profitability .
    3. Ford Model e - Develops breakthrough electric vehicles (EVs) and related software, establishing itself as a leading EV brand in the U.S. with increasing shipments and sales .
    4. Ford Motor Credit Company - Provides financial services that support customer loyalty and create new revenue streams .

    Q2 2024 Summary

    Initial Price$13.33April 1, 2024
    Final Price$12.76July 1, 2024
    Price Change$-0.57
    % Change-4.28%

    What went well

    • Ford Pro is exhibiting strong growth and profitability, contributing a significant portion of the company's earnings and offering high-margin opportunities beyond vehicle sales, such as parts, services, and software.
    • Ford is implementing innovative design and development processes through its Skunkworks team, focusing on cost-efficient production of affordable EVs, and aiming to match competitors like Tesla and Chinese OEMs in cost and efficiency.
    • Strategic partnerships, such as with CATL for battery technology, are enabling Ford to secure competitive advantages in EV production without over-reliance on external platforms, enhancing capital efficiency and maintaining control over core competencies.

    What went wrong

    • Despite higher earnings, Ford's capital base has expanded significantly, so returns have not improved, raising concerns about capital efficiency and structural costs not decreasing in the near term.
    • Ford is not returning capital to shareholders via share buybacks, with the Board refusing to authorize them, indicating potential concerns about immediate shareholder value and suggesting better uses of capital that may not immediately boost shareholder returns.
    • There is uncertainty about the sustainability of pricing strength in the Ford Pro segment, with expectations that "we expect, as we move into the '25 model year, that there will be some of the top line coming off, and that's in our guidance", implying potential risks to future revenues and margins as pricing may decline.

    Q&A Summary

    1. EV Strategy and Competition
      Q: Can Ford profitably make low-cost EVs without China's help?
      A: Ford is developing its own low-cost EV components through its Skunkworks team, aiming to produce affordable EVs profitably without relying on Chinese platforms. They have a strategic partnership with CATL for battery technology but focus on designing breakthrough EV components that are better and cheaper, ensuring they remain competitive globally.

    2. Persistent Warranty Costs
      Q: What's causing ongoing warranty issues?
      A: Ford faces warranty costs due to issues in older models, such as rear axle bolts in 2021 vehicles and oil pumps in 2016 models. While recent quality improvements are evident in better J.D. Power IQS scores, there's a lag before warranty costs decrease. Ford is enhancing testing protocols and utilizing over-the-air updates to detect and fix problems early, aiming to reduce future warranty expenses.

    3. Capital Allocation Strategy
      Q: Why not authorize a share buyback given stock value?
      A: Ford believes investing capital in growth opportunities offers better returns than share buybacks. They are channeling funds into exciting ventures like Ford Pro, electric architectures, and service businesses, which have high-margin potential and significant growth prospects, rather than repurchasing shares.

    4. Ford Pro Pricing Sustainability
      Q: Is strong pricing in Ford Pro sustainable?
      A: Strong demand and product freshness support sustained pricing in Ford Pro. Although some moderation is expected, the demand-supply imbalance remains favorable. About 60% of Ford Pro's business is from fleet contracts negotiated annually, and early indications for the 2025 model year are positive. Investment in new products across the lineup enhances competitiveness and supports pricing.

    5. Electrification Amid Policy Shifts
      Q: How might elections impact Ford's EV strategy?
      A: Ford's commitment to electrification remains firm irrespective of potential policy changes. Believing that competition from Chinese EV manufacturers will shape the industry, Ford is focused on being fully competitive globally. They emphasize manufacturing flexibility and offering customers choice, investing in both EVs and partial electrification solutions.

    6. Super Duty Capacity Expansion
      Q: Will demand absorb increased Super Duty capacity?
      A: Ford is confident that increased Super Duty capacity will be absorbed by strong demand, particularly in the chassis segment, which comprises 25% of Super Duty sales. With aging fleets in industries like infrastructure and emergency services, and a diverse multi-energy powertrain offering, Ford anticipates sustained demand for many years.

    7. Used Vehicle Residual Values
      Q: What's the outlook for used vehicle residuals?
      A: Auction values are down 9% year-over-year but have increased 3% sequentially. While a continued decline in auction values is expected in the second half, constrained supply in the used market may support new vehicle pricing. Ford Credit is monitoring return rates and market trends closely.

    Key Metrics

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    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Ford Blue34,30135,20834,51236,606140,62733,49526,67026,238
    - External Revenues--1--1--
    - Intersegment Revenues--241--21--
    Ford Model e7162,0061,9991,8056,5261361,1491,173
    Ford Pro13,24915,58913,82915,39158,05818,01916,98815,655
    Ford Next10113122
    Ford Credit2,3892,5272,6252,74910,2902,8872,9973,127
    Corporate Other42129121
    Eliminations/Adjustments(9,186)(10,378)(9,166)--(11,762)-(10,651)
    Vehicles, Parts, and Acc.37,92741,24139,91641,968161,05238,64543,54241,665
    Used Vehicles4694574824651,873510489532
    Services and Other Rev.6627327537552,902708768841
    Leasing Income1,0931,0751,0621,0544,2841,0641,0841,119
    Financing Income1,3011,4261,5631,695,9801,8191,8892,002
    Insurance Income2223253100313637
    Total Revenue41,47444,95443,80145,962176,19142,77747,80846,196
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States----116,995---
    Canada----13,391---
    United Kingdom----8,968---
    Germany--------
    Mexico----2,774---
    All Other Countries----34,063---
    North America--------
    South America--------
    Europe--------
    China (Including Taiwan)--------
    International Markets Group--------
    Middle East & Africa--------
    Asia Pacific--------
    Total Revenue41,474---176,191---

    Executive Team

    NamePositionStart DateShort Bio
    William Clay Ford, Jr.Executive Chair and Chair of the BoardSeptember 2006William Clay Ford, Jr. has been serving as the Executive Chair and Chair of the Board at Ford Motor Company since September 2006. He has been a Director since 1988 and has held various management positions within the company .
    James D. Farley, Jr.President and Chief Executive OfficerOctober 1, 2020James D. Farley, Jr. was elected as the President and Chief Executive Officer of Ford Motor Company effective October 1, 2020. He took on the additional role of President, Ford Model e in March 2022 .
    John LawlerChief Financial OfficerOctober 2020John Lawler is the Chief Financial Officer of Ford Motor Company, a position he has held since October 2020 .
    Ashwani ("Kumar") GalhotraChief Operating OfficerOctober 12, 2023Ashwani ("Kumar") Galhotra is the Chief Operating Officer at Ford Motor Company. He was elected to this position effective October 12, 2023 .
    Michael AmendChief Enterprise Technology OfficerSeptember 2021Michael Amend has been serving as the Chief Enterprise Technology Officer at Ford Motor Company since September 2021. Before joining Ford, he was the President of Online at Lowe's from 2018 to 2021 .
    Theodore CannisCEO, Ford Pro and Ford Customer Service DivisionSeptember 2023Theodore Cannis served as the CEO of Ford Pro and Ford Customer Service Division. He began his role as CEO of Ford Pro in September 2023 and has been with Ford since 1989 .
    Steven P. CroleyChief Policy Officer and General CounselJuly 2021Steven P. Croley has been serving as the Chief Policy Officer and General Counsel at Ford since July 2021. Before joining Ford, he was a partner in the Washington, D.C., office of Latham & Watkins .
    J. Doug FieldChief EV, Digital, and Design OfficerOctober 2023J. Doug Field is the Chief EV, Digital, and Design Officer at Ford Motor Company. He joined Ford in October 2023 .
    Andrew FrickPresident, Ford BlueOctober 2023Andrew Frick is the President of Ford Blue, a position he has held since October 2023. He has been involved with Ford in various capacities, including serving as the interim leader for Ford Pro .
    Marin GjajaChief Operating Officer, Ford Model eSeptember 2023Marin Gjaja is the Chief Operating Officer of Ford Model e, a position he has held since September 2023. Before this role, he served as the Chief Customer Officer for Ford Model e starting in March 2022 .
    Peter C. SternPresident, Integrated ServicesAugust 2023Peter C. Stern joined Ford Motor Company as the President of Integrated Services in August 2023. Before joining Ford, he was Vice President of Services at Apple from 2016 to 2023 .
    Jennifer WaldoChief People and Employee Experience OfficerMay 2022Jennifer Waldo is the Chief People and Employee Experience Officer at Ford Motor Company. She has held this position since May 2022. Prior to joining Ford, she was Vice President, People Business Partners at Apple .
    Shengpo ("Sam") WuPresident and Chief Executive Officer, Ford of ChinaMarch 2023Shengpo ("Sam") Wu is the President and Chief Executive Officer of Ford of China, a position he has held since March 2023. Before joining Ford, he was the Executive Vice President and President of Whirlpool Asia .
    Cathy O’CallaghanControllerJune 2018Cathy O’Callaghan has been serving as the Controller at Ford Motor Company since June 2018. She is also the principal accounting officer for the company .
    Adriana CisnerosDirector on the BoardJuly 11, 2024Adriana Cisneros was elected to the Board of Directors of Ford Motor Company on July 11, 2024. She serves on the Nominating and Governance Committee and the Sustainability, Innovation and Policy Committee of the Board .
    Michael R. AmendInterim Leader of Ford Integrated ServicesN/AMichael R. Amend is currently serving as the Interim Leader of Ford Integrated Services at Ford Motor Company. He also holds the position of Chief Enterprise Technology Officer, a role he has been in since September 2021 .

    Questions to Ask Management

    1. Despite higher earnings, Ford's capital base has expanded such that returns haven't improved. How are you addressing the trajectory of structural costs, and what steps are you taking to improve returns on capital?
    2. With many traditional automakers investing billions in R&D to achieve affordable EVs at scale, why isn't Ford pursuing more partnerships to share costs and risks, especially given your focus on capital efficiency?
    3. Given the significant investment to add 100,000 units of Super Duty capacity in Canada, how confident are you that demand will sustain these high levels, and can you elaborate on the incremental margins and expected payback period for this investment?
    4. Ford Model e generated a loss of $1.1 billion in the quarter, and you are forecasting a full-year loss of $5 billion to $5.5 billion due to pricing pressures and investments. What specific actions are you taking to turn around Model e, and when do you anticipate reaching profitability in this segment?
    5. Considering that Ford's stock ranks near the bottom of the S&P on P/E ratio and the market hasn't reflected the company's transformation, why does the Board refuse to authorize a share buyback, and do you genuinely believe there are better uses of capital than returning it to shareholders?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateDecember 2023
    End Date/DurationN/A
    Total additional amount53 million shares
    Remaining authorization30,270,000 shares
    DetailsOffset the dilutive effect of share-based compensation expected to be granted during 2024

    Past Guidance

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Full Year Company Adjusted EBIT: $10 billion to $12 billion .
      2. Adjusted Free Cash Flow: $7.5 billion to $8.5 billion .
      3. Capital Expenditures (CapEx): $8 billion to $9 billion, focusing on the low end .
      4. Ford Pro EBIT: $9 billion to $10 billion .
      5. Model e Losses: $5 billion to $5.5 billion .
      6. Ford Blue EBIT: $6 billion to $6.5 billion .
      7. Ford Credit EBT: About $1.5 billion .
      8. U.S. SAAR: 16 million to 16.5 million units .
      9. Industry Pricing: Decrease by roughly 2% .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Full Year Company Adjusted EBIT: $10 billion to $12 billion, tracking toward the high end .
      2. Adjusted Free Cash Flow: $6.5 billion to $7.5 billion .
      3. CapEx: $8 billion to $9 billion, expecting the lower end .
      4. Ford Pro EBIT: $8 billion to $9 billion .
      5. Model e Loss: $5 billion to $5 billion .
      6. Ford Blue EBIT: $7 billion to $7.5 billion .
      7. Ford Credit EBT: About $1.5 billion .
      8. SAAR: 16 million to 16.5 million units .
      9. Industry Pricing: Lower by roughly 2% .
      10. Hybrid Sales Growth: 40% growth .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EBIT: $10 billion to $12 billion .
      2. Adjusted Free Cash Flow: $6 billion to $7 billion .
      3. Capital Expenditures: $8 billion to $9.5 billion, with 40% for EVs .
      4. Ford Pro EBIT: $8 billion to $9 billion .
      5. Model e Losses: $5 billion to $5.5 billion .
      6. Ford Blue EBIT: $7 billion to $7.5 billion .
      7. Ford Credit EBT: About $1.5 billion .
      8. U.S. SAAR: 16 million to 16.5 million units .
      9. Industry Pricing: Lower by roughly 2% .
      10. Cost Reduction Initiatives: $2 billion benefit .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information about Ford's guidance for Q3 2024. They only provide details up to Q2 2024.

    Latest news

    Recent developments and announcements about F.

    Financial Actions

      New Share Buyback Program

      ·
      Dec 16, 2024, 10:22 PM

      Ford Motor Company has announced a new buyback program as part of its financial strategy. The program is designed to enhance shareholder value by repurchasing shares of its common stock. This initiative reflects Ford's confidence in its business prospects and its commitment to returning capital to shareholders. The buyback program is expected to be executed over a specified period, subject to market conditions and other factors .

      Debt Issuance

      ·
      Dec 16, 2024, 10:21 PM

      On December 13, 2024, BlueOval SK, LLC ("BOSK"), a joint venture involving Ford Motor Company, entered into a significant financial arrangement with the Department of Energy (DOE). This arrangement involves a Loan Agreement where the DOE will facilitate the Federal Financing Bank to purchase notes from BOSK, allowing for advances up to $9,633,040,000. This loan is intended to finance the construction of battery manufacturing plants in Tennessee and Kentucky. As part of this agreement, Ford has committed to guarantee 50% of BOSK's payment obligations under this loan .

      Potential Effects on Ford's Financial Health:

      1. Balance Sheet Impact: The guarantee of 50% of the loan means Ford is potentially liable for up to approximately $4.8 billion if BOSK defaults. This could significantly impact Ford's liabilities and financial ratios.

      2. Covenants and Defaults: The agreement includes covenants similar to Ford's existing credit agreements, which impose restrictions on Ford's financial operations, such as maintaining a minimum liquidity level of $4 billion. Breaching these covenants could lead to defaults, affecting Ford's creditworthiness and financial stability .

      3. Long-term Commitment: The loan's maturity is expected in July 2040, indicating a long-term financial commitment that could affect Ford's strategic financial planning and resource allocation .

      This financial obligation highlights Ford's strategic investment in electric vehicle technology but also underscores the financial risks associated with such large-scale commitments.

    Legal & Compliance

      Legal Proceedings

      ·
      Dec 16, 2024, 10:21 PM

      Summary of the Legal Matter Involving Ford Motor Company

      Key Parties Involved:

      • Ford Motor Company: A Delaware corporation involved in the joint venture.
      • SK Innovation Co., Ltd.: A corporation from the Republic of Korea, participating as a sponsor.
      • SK On Co., Ltd.: Another Korean corporation involved as a sponsor.
      • SK Battery America, Inc.: A Delaware corporation and subsidiary of SK On.
      • BlueOval SK, LLC (BOSK): The borrower and joint venture entity.
      • United States Department of Energy (DOE): The lender through the Federal Financing Bank.

      Nature of the Proceedings:

      • Ford Motor Company, along with SK Innovation and its subsidiaries, has entered into a significant financial arrangement with the DOE. This involves a Loan Arrangement and Reimbursement Agreement to finance the construction of battery manufacturing plants in Tennessee and Kentucky. The total loan amount is up to $9.63 billion .
      • A Sponsor Support, Share Retention, and Subordination Agreement (SSA) was also executed, under which Ford guarantees 50% of BOSK's payment obligations under the DOE loan .

      Potential Financial or Operational Consequences for Ford:

      • Financial Obligations: Ford is responsible for guaranteeing half of the loan obligations, which could impact its financial stability if BOSK defaults .
      • Covenants and Defaults: The SSA includes covenants similar to Ford's existing credit agreements, such as maintaining a minimum liquidity of $4 billion. Breaching these covenants could lead to defaults, affecting Ford's financial operations .
      • Operational Impact: The successful execution of the project could enhance Ford's capabilities in electric vehicle technology, but any delays or issues could affect its market position and operational efficiency .

      This legal matter is crucial for Ford as it involves substantial financial commitments and strategic operational developments in the electric vehicle sector.