By Nora Eckert and Nathan Gomes
(Reuters) -Ford Motor reported a dip in second-quarter adjusted profit on Wednesday as the automaker continues to battle costly quality issues and an EV business that is weighing on its bottom line, sending shares tumbling 12% in after-hours trading.
The Detroit automaker earned an adjusted profit of 47 cents per share, significantly missing analysts’ expectations of 68 cents, according to LSEG data.
Ford (NYSE:) CEO Jim Farley has made fixing the automaker’s quality problems a priority since he took the helm in October 2020. Since then, Ford has hired a new executive director of quality and transformed some of its production practices to avoid errors, but has still topped the industry in number of recalls.
Ford’s chief financial officer, John Lawler, said most of these warranty expenses were related to older vehicles launched before 2021. Warranty expenses went up $800 million in the second quarter compared with the previous quarter, Lawler told reporters. The CFO said field service actions in the quarter were a one-time cost increase for the older vehicles and Ford expects the second half of year to match its warranty cost expectations.
The carmaker maintained its projected annual guidance of $10 billion to $12 billion in earnings before interest and taxes.
Legacy automakers have scaled down their EV ambitions amid easing demand, a shift to hybrids and stiff competition from Tesla (NASDAQ:) and Chinese EV makers in global markets.
Earlier this month it shifted plans for a Canadian assembly plant that was expected to build a three-row EV, instead saying it would produce Ford’s flagship F-150 pickups. Farley said the company was struggling to meet soaring demand for the gas guzzlers.
On the battery-powered front, Farley is directing the company’s efforts to ramping up hybrid production as well as developing a platform for a lineup of affordable, smaller electric vehicles, which Ford is doing out of its California-based “skunk works” team.
Ford recorded a $1.1 billion operating loss for its electric-vehicle and software division in the second quarter, adding to its $1.3 billion loss from the first quarter. Executives expect this section of the company to sustain a pretax loss of up to $5.5 billion for the year.
Crosstown rival General Motors (NYSE:) reported second-quarter profit and revenue on Tuesday that beat Wall Street’s expectations, buoyed by strong pricing and demand for gas-powered trucks. The company raised its annual forecast for the second time this year.
