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Ford Motor Company stock came under pressure after a Lawrenceville, Georgia, court ordered the company to pay a $1.7 billion fine over an eight-year-old accident. The prosecution insisted that the weak roof structure of the 2002 F-150 Super Duty pickup caused the death of an elderly couple.
Defense attorneys introduced as evidence more than 80 episodes of similar accidents. Experts estimate that Ford has sold 5.2 million of these vehicles: the flaw was present in Super Duty made from 1999 to 2016. It is worth noting that the court decision has not entered into legal force, and the concern intends to appeal it. We can only hope that the lawsuit will not affect investors’ confidence in the quality of the company’s vehicles.
How is Ford doing overall? On Monday, the company announced it was cutting 3,000 full-time and contract jobs as part of a restructuring and reorientation of its business toward electric vehicles. According to the director of technology at the Center for Automotive Research in Ann Arbor, electric cars have 30 percent fewer parts than gasoline-powered car models, requiring less labor to produce.
As for quarterly results, revenue was $40.2 billion (+50% YoY), versus an expected $37.1 billion, and adjusted ROIC rose to 11.6% from 10.3% a year earlier. Despite inflation and a slowing global economy, Ford reiterated its adjusted EBIT guidance for the current year of $11.5-12.5 billion. In short, not a report, a fairy tale.
JPMorgan analysts expect pent-up retail demand, declining dealer inventories, and an aging fleet of leased cars to play into Ford’s hands. By the end of the year, JPMorgan has set a $19 target on the automaker’s stock, but it’s not so much the macro rate hikes that concern us as the increased financing costs for Ford Motor Credit in the first half of the year. Further rate hikes by the Fed will likely cause the company to pass additional costs on to consumers or cut profit margins.
