Second-quarter results for automakers have ranged from the good, to the bad, to the ugly as companies navigate the coronavirus pandemic. Ford’s, meanwhile, might be best characterized as the weird.
That’s because the company reported a $1.1 billion profit, all of which can be attributed to what Ford said was a $3.5 billion gain on its investment in autonomous Argo AI, which was listed as a “special item.” That gain was likely largely driven by Volkswagen’s $2.6 billion investment in Argo AI, which closed in June, after Ford put $1 billion of its own money in back in 2017.
And while that gain provides a nice headline for Ford, it was attributable to that massive one-time gain, and the other numbers in Ford’s earnings report are worrying. Ford’s operating income, for example, which excludes the $3.5 billion gain among other things, was a $1.9 billion loss, a number that Ford says was $3 billion more than Ford thought it would be. [Clarification, Friday, 10:42 a.m.: Apologies if my language is a little unclear here but to be a little clearer: Ford had earlier said that it expected to lose around $5 billion this quarter, making the $1.9 billion loss much better than expected.]
There was nowhere in the world, in fact, where Ford made money in the second-quarter of 2020, while it predicted that in the third-quarter it said it might make an operating profit of up to $1.5 billion before heading back downward again.
And, no, the new Bronco and Mustang Mach-E won’t be saving it, even though they may help next year.
The company said its initial outlook for Q4, which features three significant product launches delayed by the coronavirus shutdown earlier this year, is an adjusted EBIT loss. That reflects normal effects on volumes from downtime, changeover and ramp up for the all-new F-150, together with continued lower overall industry units. Wholesales of Mustang Mach-E and Bronco Sport, which will also start shipping to customers in the fourth quarter, will not have a material effect on the company’s Q4 results.
Ford said it had over 150,000 reservations for the Bronco, which is pretty strong, but those are reservations and not sales and, anyway, Ford needs sales to be better across the board for things to really improve. It will want to forget 2020, in any case, and the final sentence of its earnings release is why.
For full-year 2020, Ford expects an adjusted [earnings before interest and taxes] loss.
Correction, Friday, 9:45 a.m.: It was Volkswagen, not Volvo, that invested in Argo, now corrected to say so.