Public companies are not required by any law to do an earnings call after releasing financial documents, but many seem to find it a helpful way to augment dull spreadsheets with… equally dull answers to analyst questions. You have to be a real nerd to enjoy them. Thankfully, I am a real nerd.
But you don’t need to be much of a geek to find Ford’s earnings call interesting yesterday because CEO Jim Farley said something kinda amazing and slightly scary.
Toyota caught up on supply last year by building a ton of cars. Stellantis isn’t building as many cars because the ongoing supplier drama has resulted in a supplier strike. Workers at Stellantis plants aren’t striking, but they are getting laid off, and that’s pissed off the UAW.
Thursday Dump incoming…
Ford’s Earnings Mixed As F-150 Delays Hit Bottom Line
If GM’s earnings call was triumphant, and Tesla’s earnings call was lethargic, I suppose you could call Ford’s call cathartic? The automaker is in a weird transition point where its EV business is still losing money (development costs money), its commercial business is taking off, and its traditional gas-hybrid business was hit by ongoing quality issues.
The top line numbers are mixed: Overall revenue was up 3% from Q1 of last year, but earnings were down 24% to $1.3 billion. Ford revised its guidance upward as the company plans to spend a little less and end up with a little more cash flow in 2024.
What’s happening? The story of 2023 for Ford was a seemingly never-ending series of recalls, defects, and quality issues. Ford has long led other automakers in this category, and the Maverick has been recalled more times than Lynn Frazier.
Ford did come up with a plan to fix this, and part of that meant simply slowing down its processes, reviewing products closely before delivery, and not shipping vehicles it knew might have defects.
This means that Ford had to delay the shipment of about 60,000 new 2024 F-150s, representing a huge hit to the bottom line (that’s more than $2 billion worth of trucks).
Was this the right move? Let’s check the transcript of yesterday’s earnings call. Here’s CEO Jim Farley:
We’ve taken a lot of new testing regimens. Actually, we ended the quarter with 60,000 units in our plant stock, which hurt our first quarter, but we’ll benefit because we’re shipping those now in our second quarter for all those quality processes. And what we’re so far seeing is we avoided about 12 recalls on F-150, and we’re seeing the best performance on three MIS after launch in a long time. And I’d like to be specific here.
Twelve! TWELVE! Damn. There’s more.
Normally, after a launch, we’ve seen about — in the last five years, about a 70% spike in our defects. The industry average is about 20%. In the Super Duty and Mustang launches, we’re about that industry average 20% spike. And now, we’re seeing with the F-150 even better performance at industry average.
And boy, do we have a lot of launches in the second half to prove out this new launch process. What we’re going to see long term is fewer recalls and lower warranty costs because of this new process.
Ultimately, it’s good that Ford is dealing with this and it should benefit the company and its customers long-term if the company sticks with it.
Toyota Builds Record Number Of Cars In 2023
Toyota, like most Japanese automakers, is on a fiscal year that ends on March 31st, so we’re starting to get more info from Toyota.
For the year ended March, Toyota said its parent-only global sales rose 7.3% to 10.31 million units year-on-year, surpassing the 10 million mark for the first time, while its output came to 9.97 million units, up 9.2% on the year.
The world’s largest automaker by volume, however, saw its sales and production fall in March amid fierce competition in China, the world’s largest auto market.
The automaker did slow down a bit in March and Toyota is also delaying its EV production in the United States, so we’ll see if this holds this year.
European Stellantis Plants Shut Down As Supplier Goes On Strike
I’ve been focused on Stellantis and its quixotic plan to apparently make all of its suppliers in the United States hate the company, but things aren’t great in Europe either. Two plants in France and one in Britain are shut down as workers there go on strike.
From Reuters again:
MA France produces components on a site in the northeastern suburbs of Paris previously used by PSA until it was shut in 2014. PSA has since become Stellantis through its merger with FCA.
Workers at the plant are worried about plans to move production to Poland, said Brahim Aitathmane, head of the Force Ouvriere union at Stellantis.
What could the workers possibly be worried about?
UAW Calls Stellantis Layoffs ‘Disgusting’
Earlier this week, Stellantis laid off approximately 199 workers at the Sterling Heights Assembly Plant outside of Detroit. This is part of the company’s ongoing plans to cut costs at, seemingly, any cost.
Unsurprisingly, The Detroit News has a response from the head of the local UAW chapter and he was not happy:
Michael Spencer, president of United Auto Workers Local 1700, which represents workers at the plant, said in an email that the layoffs were “disappointing, disgusting and a disservice” to employees.
The maker of Jeep, Chrysler, Dodge and other vehicles also is planning to lay off an unspecified number of additional workers at its U.S. factories in the coming months to deal with a rapidly changing global auto market, the company said in a statement Tuesday.
“Trust me, the leadership here is going to fight like hell with the membership and make sure that they honor their commitments,” UAW President Shawn Fain said of Stellantis during a Facebook Live on Tuesday evening in response to member comments about the automaker. “And you know what? Stellantis is pathetic. Honestly, the leadership is pathetic. You got a CEO over there across the pond that wants to talk about how they need to cut costs and all this stuff, but it didn’t stop him from giving himself a 56% pay increase.”
Yes, all of that, but also Stellantis isn’t building particularly competitive cars and until it does so it doesn’t make a ton of sense to keep production where it is.
What I’m Listening To While Writing TMD
Let’s tie it all together this Thursday. Two days ago we had Caroline Polacheck and yesterday we had Chromeo. Today we’ve got bassist/singer Blu DeTiger, who was Caroline Polacheck’s bassist and has recorded with Chromeo.
The Big Question
How long will it take for Ford to turn around its quality issues? Is this a one-year project? A five-year project? Does it impact your purchasing decisions?
My dad has experienced the Ford issue plague first-hand this past year. He traded in his absolutely trouble-free 190k mile 2014 TRD Tacoma for a 2023 F-150 XLT with the 3.5 ecoboost.
That truck has been to the dealer at least half a dozen times in the year he’s owned it. Here are the issues that I’m aware of he’s had with it:
Needless to say my multi-time Toyota truck owning father is not satisfied with the “reliability” of his Ford. As a Subaru guy, my cars feel like Toyota-levels of reliability compared to that truck.
Not saying all F-150’s are problematic, but this has certainly left a bad taste in my family’s mouth especially given that his truck was not exactly cheap.
Quality issues at Ford – I worked for a SE Michigan Ford Mercury dealer in the late 80s. We had so many problems with new cars that the dealership owner would get an earful from his customers about it when their new Grand Marquis or Thunderbird would arrive on the tow hook.
One day he walked through the garage yelling and waving his arms. I didn’t catch all of it because I was working on a parts order with a wholesale customer, but he did yell while walking past the parts counter, “Quality is Job One, eh? More like job f***ing six!”
He wasn’t wrong. And Ford hasn’t learned a damn thing since.
IDK, if Ford wants a big dumb-dumb who likes to jump stuff to stress-test the Raptors by repeatedly jumping them…hello.
Ford could turn around its quality issues in a year. But following the “Cheap, Fast, Good: Pick 2” rule and knowing Ford has already selected “Cheap”, it’s going to be longer. But even if they did fix it in 1, public perception will be 5 years at least. And yes, it has impacted my purchasing decision at some level. I cancelled my Ford Maverick order. Primarily because upon thinking about it, it’s not the best vehicle for my use case. But the recalls and overall Ford quality issues have solidified my decision.
My nephew’s girlfriend has a Ford Escape. It’s climate control system functions very strangely. She’s had it in for warranty work a few times, couple different things. And I think one recall. She loves it, though.
That Stellantis vans photo: that’s some damn fine badge engineering on display.
“Yes, as a matter of fact, I do drive a Peucitrovauxiat. Why do you ask?”