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Here's Why Ford Thinks the World Could Soon Face a New Major Problem

Ford’s Q4 earnings report is a mix of good and bad news. The carmaker's fourth quarter generated a net income of $1.3 billion, and if you believe this is solid performance, here's the shocking bit. This is no more, no less than $11 billion lower than the same quarter of the previous year.
Ford says the world is going to face new headwinds this year 6 photos
Photo: Bogdan Popa/autoevolution
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The overall 2022 results don't paint a more encouraging story either. Ford reported a $2 billion loss, with the figures falling a whopping $20 billion below the profit it reached in 2021.

CEO Jim Farley admitted in the earnings report that Ford “should have done much better” in 2022, promising to invest particularly in execution and performance in 2023.

This year, the company expects to sell approximately 15 million vehicles in the United States and around 13 million in Europe. It hopes it can generate up to $11 billion in adjusted EBIT (earnings before interest and taxes). Farley, however, acknowledges that 2023 is going to be a challenging year.

Despite improvements in terms of the supply chain, Ford believes the recession will cause particular problems in the United States and in Europe. The carmaker also expects the higher industrywide customer incentives to make the market more competitive, especially as car manufacturers manage to align production with demand.

The consensus right now is that the U.S. has 65 percent chances to face a recession, but Goldman Sachs says the probability is much lower at just 35 percent.

The inflation level, which has skyrocketed in the last few months fueled by the macroeconomic problems and the rising prices of materials, could eventually go negative thanks to the supply chain recovery. Ford expects the U.S. to deal with just a mild recession, with the impact to be heavier in Europe where the company says a moderate downturn is very likely.

The U.S. economy, however, is currently facing massive layoffs, especially in the technology sector, with giants like Google and Microsoft recently announcing that they are letting thousands of people go. No American carmaker announced layoffs so far.

Leaving aside the bad news, Ford also tries to see the glass half-full. The company says the chip shortage is going to become less of a headache this year, and given the costs of goods sold, including the materials it needs for vehicle manufacturing, it expects little to no disruption in vehicle manufacturing.

Ford is also confident that the EV market will continue to grow. In January, it managed to control 6.1 percent of the EV market, an increase of one percent versus the same quarter in 2021. Tesla was still the leading name, but Ford secured the runner-up spot in 2022.

The internal combustion vehicles, however, continue to dominate Ford’s sales. Last month, the company sold over 146,000 vehicles in its domestic market, and 91 percent of them came with either petrol or diesel engines. Hybrid models are the ones losing traction rapidly, as their sales fall no less than 26.3 percent year-over-year.

Ford believes the debut of the all-new Super Duty truck could help boost sales in 2023, adding that the strong U.S. dollar could represent a headwind during this year.

While the American carmaker seems to be fairly optimistic, saying that the chip shortage would no longer be a problem in 2023, other companies in the market look at the uncertainties in the supply chain in a more cautious manner. Toyota, which recently announced that it plans to sell 10.6 million vehicles this year, said the target could eventually be adjusted by as much as 10 percent due to continued challenges in the semiconductor business and the high cost of materials.
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 Download: Ford Q4 2022/full 2022 earnings report (PDF)

About the author: Bogdan Popa
Bogdan Popa profile photo

Bogdan keeps an eye on how technology is taking over the car world. His long-term goals are buying an 18-wheeler because he needs more space for his kid’s toys, and convincing Google and Apple that Android Auto and CarPlay deserve at least as much attention as their phones.
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