Ford hits top gear despite pandemic

Ford has reported a strong profit for 2021 in a sign the global car industry could return to a degree of stability after two years of pandemic-related disruptions.

Ford says it expects global vehicle deliveries to increase by 10-15 per cent. Picture: AFP

Ford reported a strong profit for 2021 and issued an upbeat forecast for this year, the latest sign that the car industry could return to a degree of stability after two years of pandemic-related disruptions.

Still, the carmaker’s shares were down more than 4 per cent after trading on Thursday, following fourth-quarter earnings that fell short of Wall Street forecasts. Ford chief financial officer John Lawler said analysts probably expected higher output for the quarter, but the company was constrained by the computer chip shortage and other challenges linked to the Covid-19 crisis.

For this year, Ford said it expected global vehicle deliveries to increase by a range of 10-15 per cent. Additionally, it forecasts pre-tax profit to rise 15-25 per cent to a range of $US11.5bn-$US12.5bn ($16.1bn-$17.5bn) in 2022. The company cited its expectation for continued strong pricing, which it said should offset higher commodity prices, and a gradual easing of supply chain problems.

The carmaker reported full-year net income of $US17.9bn, largely driven by $US11bn in special items booked in the fourth quarter. Those items, which included an $US8.2bn paper gain from its investment in start-up Rivian Automotive and an increase in the value of its pensions, are excluded from the pre-tax, adjusted earnings tracked by Wall Street.

For the fourth quarter, Ford’s adjusted pre-tax profit rose 19 per cent to $US2bn.

The global car industry has endured nearly two years of choppiness, much of it related to the supply chain challenges that have snarled manufacturing lines and left dealerships short on ­vehicles.

The tight supplies on dealership lots – and related high prices – are likely to drag through much of this year, executives have said, because carmakers have a backlog of customer orders to fill before replenishing dealer stocks.

Research firm IHS Markit expects a rebound in vehicle output this year as supply chain problems dissipate. The firm expects global production to increase about 9 per cent from last year, to 76.4 million vehicles.

It projects output snapping back even faster in North America, with a forecast of 15.2 million vehicles produced in the region, which would be a nearly 17 per cent increase from last year.

On Tuesday, General Motors said it expected the company’s factory activity to rebound sharply this year, forecasting growth of 25 to 30 per cent in global vehicle deliveries compared with 2021. GM expected output to improve gradually, reaching pre-pandemic levels by the third and fourth quarters, finance chief Paul Jacobson said.

“It doesn’t mean that things won’t pop up. But certainly, what we’re seeing in the very, very near term is giving us a little bit more confidence,” Mr Jacobson said.

GM’s production forecast surprised some analysts, who viewed it as a sign that the chip crisis continues to abate. In a research note, Evercore ISI analyst Chris McNally said GM’s report “can only be viewed as a major positive” for car companies and parts suppliers.

Some analysts warned that GM and other carmakers that are trying to lift output after two years of constraints must get thousands of suppliers to buy into their bullish forecasts.

Computer-chip shortages and other supply chain problems could prove stubborn, said Mark Fulthorpe, an analyst who heads IHS Markit’s global production forecasts. He cited chip-output disruption from recent flooding in Malaysia and Covid-19 restrictions in Japan.

Like rivals, Ford has benefited from surging new vehicle prices and thin selection on dealership lots. Car companies have sharply cut discounts and other incentives that they normally offer to compete for buyers’ attention. That helped push up the average price paid by US consumers to more than $US40,000 last year.

The Wall Street Journal