Ford reports net loss, will take $2.7 billion charge as Argo AI shuts down


Ford Motor Co. on Wednesday reported third-quarter results that beat expectations, but the auto maker forecast full-year adjusted profit at the low end of its expectations and booked a big impairment charge for a self-driving vehicle startup that is reportedly shutting down.

The results came as supply-chain complications endure for the auto industry, and as the company and others try to push ahead with electric and self-driving cars.

But Ford F, -0.08%, in its earnings release, said it concluded that large-scale production, sale and profitability for vehicles that can operate without a driver’s responses — so-called “Level 4” autonomous automobiles — “will be further out than originally anticipated.” However, it said enthusiasm for less sophisticated automation — so-called “Level 2” and “Level 3” driver-assistance systems — was higher, and worth more near-term focus.

Company executives made the remarks amid signs some of Ford’s self-driving investments were sputtering. Ford said it recorded a $2.7 billion noncash, pretax impairment on its investment in startup Argo AI. TechCrunch on Wednesday reported that Argo AI, which Ford said it would invest $1 billion in back in 2017, is closing up shop.

“In the third quarter, Ford made a strategic decision to shift its capital spending from the L4 advanced driver-assistance systems being developed by Argo AI to internally developed L2+/L3 technology,” executives said in a statement. “Earlier, Argo AI had been unable to attract new investors.”

Ford reported a net loss of $800 million for the third quarter, or 21 cents a share, contrasting with with a $1.8 billion profit, or 45 cents a share, in the prior-year period. The auto maker’s sales were $39.4 billion, compared with $35.7 billion in the quarter last year.

Adjusted for gains and losses on pensions, investments and costs related to things like staff and dealerships, Ford earned 30 cents a share, compared with 51 cents a year ago.

Analysts polled by FactSet expected adjusted earnings of 27 cents a share, on sales of $37.46 billion.

Executives said they expected full-year earnings before interest and taxes to be about $11.5 billion. In September, the company said it expected that figure to land within a range of $11.5 billion to $12.5 billion.

Ford also raised its full-year outlook for adjusted free-cash flow to $9.5 billion to $10 billion. It ended the third quarter with operating cash flow of $3.8 billion, and adjusted free-cash flow of $3.6 billion.

Shares fell 2.5% after hours.

Ford reported the results as the auto industry deals with concerns about both production and demand, as ongoing supply-chain contortions lead to parts shortages and higher prices. Some signs have emerged that those supply-chain hitches have eased. But higher prices risk spooking potential car buyers.

Ford in September warned that tighter supplies of auto parts would leave it with 40,000 to 45,000 unfinished vehicles sitting in its inventories at the end of the third quarter, with “inflation-related supplier costs” running about $1 billion higher than expected. But the company, at that time, stuck with its full-year adjusted-profit outlook.

Ford, as with other auto makers, is putting more effort behind developing electric cars and trucks, including an electric version of its popular F-150. But it is laying off thousands as part of a split into two businesses — one devoted to electric vehicles, called Ford Model e, and one devoted internal combustion engines, called Ford Blue.

A day earlier, however, rival General Motors Co.noted signs of its supply chains loosening up.

On Tuesday, executives at General Motors GM, +2.30% noted easing in its supply chain and production improvements despite a difficult economic backdrop. GM stuck with its full-year outlook, cited strong demand, and said the company had landed some supply agreements and was working with chip makers to loosen up the flow of car parts and components.

Shares of GM fell 2.3% on Wednesday.

The auto market has been roiled by a semiconductor shortage that gummed up production and drove up the price of new cars, and then used ones, as new vehicles got too expensive for buyers. Used car prices have trended lower since. UBS analysts have said that an auto undersupply could balloon into an oversupply, as higher prices threaten to suppress consumer shopping and raise concerns of a recession.

Edmunds last month said it expected new-vehicle sales in the U.S. to fall 0.9% in the third quarter when compared with the period in 2021. The auto-data provider said auto inventories have expanded, as chip supply chains open up.

Ford stock is down 38% so far this year. By comparison, the S&P 500 index SPX, -0.74% is down 20% over that time.

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