Ford Knows It Can’t Survive On Just Gas-Powered Trucks And Mustangs

Ford joined other companies in putting out its third-quarter financials yesterday, and the numbers are up year-over-year, but the medium-term guidance is a little mixed. If you’re going to bet on Ford you’re wagering the company is going to be a better one in two years. This is different from General Motors, which is doing quite well right now. Ford, at least, is in better shape than Stellantis, which has no timeline that makes sense.

Today’s Morning Dump will focus on the future. Ford has one. But does Polestar if it can’t sell cars in America? That’s what might happen under new Commerce Department regulations. Lucid will fare better, as it builds its vehicles in America, but is the Gravity enough to save the company?

If your friends are like my friends, they’re currently losing their minds over this or that poll. Most of these don’t matter. A poll of whether or not Michigan voters think the Federal government should subsidize the retooling of a plant in Lansing to build EVs for Cadillac is kinda interesting though.

Ford Is Holding Out For 2027

A friend of mine has lived outside of New York City for years and has always said that his medium-sized town is the “city of the future.” He’s been saying this the entire 16+ years that I’ve known him. It was a bit of a joke for a long time as you can’t be the “city of the future” forever.

I feel the same about Ford. The company is in decent shape and has been for a long time. An investment in hybrids and small trucks have been paying off, and Ford announced yesterday that it even slightly beat expectations in the third quarter on both revenue and operating profits.

So why is the company’s share price dropping today? Ford had to revise down its full-year earnings (EBIT) forecast from a projection of $10-12 billion down to $10 billion. In general, things seem a bit vague for the present.

From Reuters:

“During the call, we sensed a tactical turn in the focus of management as they try hard to get through the remainder of the year and look towards an increasingly uncertain 2025,” Bernstein analysts said.

What happened? Here’s Ford CFO John Lawler talking to investors on the earnings call:

[T]wo gating factors keep us from a record adjusted EBIT this year: higher-than-expected warranty costs and the impact of inflation at our JV, Ford Otosan in Turkey, which increases the material cost of Transit vans sold in Europe.

While inflationary pressures in Turkey is outside of our control, increased warranty costs are within our control. We now expect full-year company adjusted EBIT of about $10 billion, which includes lower-than-planned volume in the second half for Ford Pro and Ford Blue due to supplier disruptions. In general, we see supply and demand for vehicles in balance. We continue to expect adjusted free cash flow of $7.5 billion to $8.5 billion with capex between $8 billion to $8.5 billion.

All of this is normal business stuff, and Ford says it hit a dealer inventory of 68 days of dealer stock, which is close to its goal of 50-to-60 days. That’s a good sign when you consider how other automakers, particularly Stellantis, are drowning in inventory right now.

A deeper dive into Ford’s numbers shows where the money is being made: trucks/crossovers and work trucks/vans.

The above chart from Ford mostly tells the whole story of the present. Ford broke itself into three different divisions:

• Ford Blue (ICE/hybrid passenger vehicles)
• Ford Model e (electric cars)
• Ford Pro (commercial vehicles/service/software)

Ford Blue is by far the biggest revenue pool, which makes sense, and it had an ok quarter as part of a mixed year. But Ford Blue basically makes the Mustang (the company’s only “car”) and a lot of crossover/suvs and trucks.

By far its biggest profit center is its commercial division, even with Turkey’s ongoing inflation. Ford’s electric car division is, as always, still losing money.

What does the future look like? After years of quality problems, the automaker thinks it’s heading in the right direction and says it’s lowering the amount of warranty and recall work it’s doing on new vehicles even with its bigger launches (remember, Ford delayed the F-150 rollout until it felt like the trucks were good enough).

But the future is still in the future, and Ford seems to be putting more and more pressure on its “skunkworks” team that’s developing a cheap mid-sized truck and other affordable electric vehicles on a brand new platform. The expectation is that those vehicles will launch in 2027.

Here’s how CEO Jim Farley ended the call when asked about these future plans:

I don’t want to get into too much detail, but I’m really proud that we basically verified the design of each part like a year or two earlier than we normally do. And we verified it from the supplier standpoint and ours by looking at a variety of different suppliers, even challenged our suppliers. And that has been an eye-opening experience for us to see [SIC] what really should cost is on a lot of these advanced components, especially because we think companies like BYD have an incredible advantage on affordability of batteries. So, we have to make that up where our opportunity is on the EV component side, inverters, gearboxes, motors, etc.

And I think it’s a combination of very new approaches to the actual design of the component as well as leveraging new suppliers as well as working way up front on the part design itself to get the cost out using the technology road map of the supplier. And that’s where we’re seeing a lot of the progress. Basically, the answer to your question is we radically simplified the vehicle. Like if you look at the number of parts in the vehicle, it is just a completely order-of-magnitude change.

The assumption is that it’ll be a pure BEV, but something Farley said in response to a tweet by our own David Tracy has me wondering:

David, interesting comments……

— Jim Farley (@jimfarley98) October 26, 2024

Is Ford also developing an EREV a la the new Scouts?

There are so many things to look forward to, and Ford needs things to look forward to at the moment. If the company is just making traditional ICE-powered vehicles it’s likely going to be stuck somewhere around its current revenues. The Ford Pro stuff is working out quite well for the company, but there’s probably some upper limit on that.

Ford can’t be the company of the future forever, just like my friend can’t live in the city of the future forever. Of course, the joke’s on me, because now we’re neighbors.

Polestar Says It Might Have To Stop Selling Cars In The United States

Sino-Swedish electric carmaker Polestar is in a tricky spot. It’s likely going to survive the new 100% tariffs on Chinese-built vehicles as it ramps up production at its South Carolina facility.

However, the feds aren’t quite done yet. Earlier this year the Department of Commerce said it had some vague plan to do something about connected cars, which turned into a very specific plan to ban connected cars built in China or with specific Chinese-built hardware.

That’s going to be hard on Ford and GM, both companies that are importing cars from China to the United States, but it’ll especially be rough for Polestar:

From Automotive News:

The automaker said in comments filed with the Commerce Department that a proposed rule prohibiting Chinese connected vehicles on American roads due to national security concerns would bar the sale of vehicles that Polestar is building in South Carolina as well as those produced in China.

Polestar said a substantial portion of its operations are outside China, while seven of its 10 directors are from Europe or the U.S. and its CEO is German. Polestar said it has around 2,800 employees globally, with 280 in China.

Commerce “should consider whether a rule that effectively shuts down the operations of a lawfully organized U.S. company with substantial U.S. investments and so many personnel and key decision-making units in friendly nations and the U.S. is appropriately tailored to address the stated national security concerns,” Polestar said.

It’s probably not going to be decided by this administration, though I wouldn’t hold my breath that any future President is going to grant a lot of leeway to Chinese automakers.

The Lucid Gravity Will Cost $79,900… Eventually

The new Lucid Gravity SUV looks great and if you want a big, efficient three-row electric SUV thing it’ll probably not be a bad way to go. You just need to be pretty well-off to put down an order because the first version produced, the Grand Touring trim, will cost $94,900 and the base trim will cost $79,900 when it eventually goes on sale.

That’s a lot of car for the money, giving buyers both 800 horsepower and a projected range above 440 miles. By comparison, an all-wheel drive Tesla Model X costs $79,900 and offers just 335 miles of range. The Plaid version costs $94,990.

Did you see what Lucid did there? It’s $90 cheaper and offers almost 30% more range. A Long Range RWD Kia Ev9 is cheaper at $59,200, but it offers just 320 miles of range.

Lucid, which loses a ludicrous amount of money on every car it sells, needs the Gravity to be successful. The problem is that the three-row EV space is saturated and I’m not sure it’s the most exciting place to play right now. Even if it’s the best three-row electric SUV I’m concerned that those customers already bought an R1S or a Model X.

Perhaps with its longer range it can start taking on X7 and GLE buyers? Maybe? If you’re Lucid you really need this to frunking work.

Should The Government Pay Companies To Retool For Electrification?

A new poll from The Detroit News and local TV station WDIV-TV found that voters were fairly evenly split on the idea of spending federal taxpayer dollars on helping General Motors retool its Lansing, Michigan plan to build electric cars.

Per The Detroit News:

The survey of 600 likely voters, conducted Oct. 22-24, found that about 46.1% of voters oppose the Biden administration’s $500 million grant for converting GM’s Lansing Grand River Assembly plant to an EV plant, while 45.6% said they support it.

The narrow gap — even narrower than the overall statewide gap between Democratic presidential nominee Kamala Harris and Republican nominee Donald Trump — reflects how strongly the topic of EVs has become tied to presidential politics in automotive-heavy Michigan.

“The conversation about electric vehicles has been fully engulfed by the political campaigns,” said pollster Richard Czuba, founder of the Glengariff Group, a Lansing-based firm that conducted the poll.

There’s some fun nuance in this poll and I appreciate the pollster trying to remove the politics from it and asking voters to choose between two different statements about supporting electric car production:

The first choice: “Michigan should focus on building gasoline powered vehicles and the jobs that come with it. If automakers want to build electric vehicles, they should do it somewhere else even if it means those jobs go somewhere else.”

The second: “Michigan should fight to win both gasoline powered auto jobs and electric vehicle auto jobs. Regardless of what kind of vehicle it is, it should be built in Michigan.”

Only 9% of the respondents agreed with the first statement, with 88% agreeing with the second one.

What I’m Listening To While Writing TMD

Many people believed that LCD Soundsystem was a British band, even though they’re proudly from Brooklyn and mostly American. This prompted the great “North American Scum,” so I support the confusion if we keep getting bangers.

The Big Question

Ford’s shares were $10.25 in October 1993. They were a little higher at about $11.41 per share in October of 2003. Right now the shares are at… $10.32. What will Ford’s share price be in October of 2028?