Vehicle Sales, Financing Services – The Madison Leader Gazette
Ford Motor Co. (F), founded in 1919 by Henry Ford, is a leader in the global automotive industry. Ford designs, manufactures, sells and services a full line of cars, trucks and utility vehicles. The company also offers a wide range of financial services to support auto dealerships and vehicle sales. The company is currently focused on increasing production of electric cars, mobility services and autonomous driving technology. Ford operates worldwide and employs approximately 186,000 people worldwide. Ford’s competitors include established automakers such as General Motors Co. (GM) and Japanese company Toyota Motor Corp. (TM) as well as new entrants such as electric vehicle manufacturers Tesla Inc. (TSLA) and Chinese company NIO Inc. (NIO).
Key points to remember
- Ford is an automotive company that sells cars, trucks and sport utility vehicles. It also ensures the maintenance and financing of vehicles.
- The vast majority of the company’s revenue comes from auto sales.
- Mobility is the smallest operational segment in terms of turnover, but also the fastest growing one.
- Ford Credit was the only operating segment to post positive earnings for the most recent quarter, measured by earnings before interest and taxes (EBIT).
- Ford announced in September 2021 a total investment of $ 11.4 billion in two US sites that will focus on production and batteries of electric vehicles (EVs).
Ford’s last earnings report was for the second quarter of 2021, ended June 30, 2021. The company posted net income of $ 553 million, down substantially from net income of $ 1.1 billion in the year. quarter of the previous year. Despite this, Ford reported company-wide adjusted earnings before interest and taxes (EBIT) of $ 1.1 billion in the second quarter of 2021, compared to adjusted EBIT of $ -1.9 billion at the same. quarter a year earlier. The company’s total revenue for the second quarter of 2021 was $ 26.8 billion, up 38.1% year-over-year (YOY) as sales began recover from the major economic disruptions caused by the COVID-19 pandemic from early 2020. Throughout the pandemic, Ford’s business has been negatively affected by production suspensions and the global semiconductor supply shortage. After suspending production at facilities around the world in March 2020, Ford returned to normal production schedules in June of the same year.
Ford Business Sectors
Ford operates through three business segments: Automotive, Mobility and Ford Credit. The company breaks down revenue and adjusted EBIT for each segment. EBIT is a measure of profitability calculated as revenue less expenses excluding taxes and interest. Additionally, Ford reports corporate governance expenses, interest income, and investment gains and losses in a fourth category, Corporate Other, although this is not considered an operating segment.
Ford derives the vast majority of its revenue from the sale of vehicles, parts and accessories around the world under the Ford and Lincoln brands. The automotive segment includes revenues and costs related to vehicle development, manufacturing, distribution, service and electrification programs. It also wholesale vehicles to dealers and distributors in five major geographic segments: North America, South America, Europe, China (including Taiwan) and International Markets Group.
With revenues of $ 24.1 billion in the second quarter of 2021, Ford’s automotive segment accounted for 90.2% of revenues in the second quarter of 2021. Automotive revenues grew 45.1% year-over-year. during this quarter, the second fastest rate among Ford’s three operating segments. However, the Automotive segment recorded a loss for the second quarter of 2021, measured by Adjusted EBIT, of – $ 95 million. This is a dramatic improvement over EBIT of $ 2.1 billion in the same quarter a year earlier.
For the second quarter of 2021, Ford’s adjusted EBIT for its automotive businesses in North America and International Markets Group were each positive, while its adjusted EBIT for its automotive businesses in South America, Europe and China were all negative. . Automotive Adjusted EBIT for South America, Europe and China totaled – $ 493 million for the quarter.
Ford’s Mobility segment includes development costs for the development and production of autonomous vehicles. It also includes Ford’s stake in Argo AI, a developer of autonomous driving systems, and investments in Spin, a provider of micro-mobility services.
Mobility is the smallest of Ford’s segments in terms of revenue. It only generated $ 21 million in revenue for the second quarter of 2021, or about 0.1% of total quarterly revenue. It was the fastest growing segment in terms of revenue, tripling year-over-year for that period, although that growth was outside of an extremely small base. Mobility reported adjusted EBIT of – $ 182 million for the second quarter of 2021, an improvement from – $ 286 million in the same quarter a year earlier.
The Ford Credit segment includes the Company’s vehicle finance and leasing business. The company offers a variety of auto finance products to and through dealerships around the world. Most of Ford Credit’s business is in vehicle financing, dealership support and leasing.
Ford Credit reported quarterly revenue of $ 2.6 billion for the second quarter of 2021, or about 9.7% of total revenue. That figure was down 5.0% year-on-year, making Ford Credit the only of the company’s operating segments to report lower year-on-year revenue for the quarter. Despite this, Ford Credit generated adjusted EBIT of $ 1.6 billion in the second quarter of 2021, almost tripling year-on-year as it benefited from the rebound in vehicle sales from the previous year. This is the only operating segment to report positive Adjusted EBIT during the quarter.
During the quarter, Ford Credit benefited from a historically low loss to receivables ratio (LTR), which reflects low losses and strong net recoveries. Ford Credit auction values in the United States were also 39% higher than a year ago, reflecting strong demand for used cars.
Recent Ford Developments
Under the leadership of CEO Jim Farley since fall 2020, Ford has placed a high priority on electric vehicles and related technologies. In May 2021, the company announced its ambition to be a leader in electric vehicles and connected services. Ford predicts that 40% of its global vehicle volume will be fully electric by 2030 and plans to spend more than $ 30 billion on electrification and battery development by 2025. On September 27, 2021, Ford announced a series of measures to increase its technology and production of electric vehicles. Ford will create a 6 square mile campus in Tennessee to build the next generation of F-series electric pickup trucks and advanced batteries. Ford will also build twin battery plants in Kentucky. The company plans to invest $ 11.4 billion in the two sites, creating approximately 11,000 new jobs.
Also in September, the company announced a partnership with retail giant Walmart Inc. (WMT) and Argo AI to launch an autonomous vehicle delivery service in select markets in the United States. The service aims to use Ford’s autonomous vehicles to deliver Walmart orders to customers. . The launch is a first effort in what Ford describes as “large-scale autonomous vehicle operations in a large footprint of American cities.”