Popular products, customer choice across gas, hybrid, electric vehicles drive full-year growth in each customer-centered auto segment; Ford Pro and Ford Blue strongly profitable
Ford+, in its first full year of operating with customer-centered business segments in 2023, demonstrated the strategy’s capacity to adapt to the wants and needs of customers and give them great experiences and value, while generating growth and profitability.
“We’re the only company that gives customers such a wide range of choices – gas, hybrid and electric vehicles – made possible by our Ford+ plan and the talented team that’s carrying it out,” said President and CEO Jim Farley. “Ford is creating a product, software and services powerhouse with huge potential for this year and the long haul.”
Company Key Metrics Summary
Ford’s fourth-quarter 2023 revenue was $46 billion, an increase of 4% from the same period a year ago on comparable vehicle volumes. Net pricing was favorable. A net loss of $526 million in the period was attributable to a $1.7 billion pretax, non-cash accounting loss related to the remeasurement of pension and other postretirement employee benefits plans. Adjusted earnings before interest and taxes, or EBIT, totaled $1.1 billion.
For full-year 2023, revenue was up 11% to $176 billion. Net income improved year-over-year to $4.3 billion; adjusted EBIT of $10.4 billion was essentially flat year-over-year and at the high end of guidance that Ford provided following ratification of its new contracts with the UAW in the U.S. and Unifor in Canada.
Profitability and cash flow from outside North America in 2023 represented a reversal from a combined loss of about $2 billion in 2020. The improvement in those markets reflected benefits from lower capital approaches in China and elsewhere, and continued strength of the Ranger midsize pickup and Everest SUV.
Operating cash flow of $14.9 billion for all of 2023 was solid; adjusted free cash flow of $6.8 billion was significantly better than the company’s outlook of $5.0 billion to $5.5 billion. Ford’s balance sheet remains strong, with nearly $29 billion in cash and more than $46 billion in liquidity at the end of the year.
CFO John Lawler said that the company’s robust cash flow and disciplined capital allocation enable vital investments in Ford+ while also returning value to shareholders – targeting distributions of 40% to 50% of adjusted free cash flow.
Accordingly, the company today declared a first-quarter regular dividend of 15 cents per share and a supplemental dividend of 18 cents per share. The dividends are payable March 1 to shareholders of record at the close of business on Feb. 16.
Lawler said that Ford will improve capital efficiency by both selectively reducing investments and raising the bar on expected returns for initiatives that the company greenlights.
“The objective is to improve total adjusted return on invested capital from about 14% in 2023 to 20% over the next couple of years,” Lawler said. “Simply ‘good’ isn’t good enough and investments are going to projects that have credible plans to deliver their targeted returns.”
EVs, according to the company, provide a great illustration.
“EVs are here to stay, customer adoption is growing, and their long-term upside is central to Ford+,” said Lawler. “The customer insights we’re getting by being an early mover in electric pickups, SUVs and commercial vehicles are invaluable – especially as we’re developing next-generation EVs that are going to surprise customers and be profitable within a year of launch.”
However, with mainstream customer adoption of EVs happening at a slower rate than the industry expected, Ford said months ago that it’s deferring certain capital investments in EVs until they’re justified by demand and prospects for acceptable returns.
Business Segment Full-Year Highlights
Ford Pro – which is devoted to understanding the needs of and developing solutions for commercial customers – produced full year revenue growth of 19% and EBIT of $7.2 billion, more than double in 2022, with a margin of 12.4%.
Farley called Ford Pro “the global leader in work” with its Super Duty trucks, Transit vans and high-value services that help commercial customers accelerate their productivity. He said that the segment is on track to an EBIT margin in the mid-teens by further extending Ford Pro’s substantial competitive advantages.
Commercial customers and Ford are benefiting from the 2023 launches within Ford Pro’s primary vehicle franchises: all-new Super Duty trucks in North America and Transit Custom vans in Europe. In the fourth quarter, software subscriptions increased by nearly 50% from the prior year; orders for mobile repairs more than doubled.
Ford Blue, the company’s gas- and hybrid-vehicle business, reported a full year 8% revenue gain that outpaced wholesales growth of 3%, EBIT of $7.5 billion and a margin of 7.3%. Hybrid vehicles – especially hybrid versions of the legendary F-150 and compact Maverick pickups – last year accounted for 13% of Ford Blue’s U.S. volume.
“We sold about 700,000 hybrids worldwide over the past three years and Ford is the only brand in the top three in both hybrids and EVs in the U.S.,” Farley said. “We’re expecting double-digit hybrid growth again in 2024.”
By the end of 2024, 60% of Ford Blue’s global vehicle lineup will have been recently refreshed. That includes a new version of the legendary F-150 coming soon – part of the company’s
F-Series of trucks, the best-selling vehicle in the U.S. for 47 straight years.
Ford’s pickup leadership is broadly based and worldwide, comprising F-Series, including Ford Pro’s Super Duty lineup; Ranger; and the compact Maverick. In its 2024 buying guide, Consumer Reports named Maverick the best small truck and Maverick Hybrid the top fuel-efficient truck in its 2024 Buying Guide.
Ford Model e’s wholesales and revenue were both up at double-digit full-year rates. The start-up segment incurred a full-year EBIT loss of $4.7 billion, reflecting an extremely competitive pricing environment, along with strategic investments in the development of clean-sheet, next-generation EVs.
Sales volumes of the F-150 Lightning pickup and Mustang Mach-E SUV both were up year-over-year and respectively the top-selling electric pickup and No. 3 most popular EV of any type in the U.S. for 2023.
Ford continued to build momentum behind its software-enabled services. Total paid software subscriptions across all segments rose 8% sequentially in the fourth quarter to about 630,000.
During 2023, the company expanded availability of Ford’s BlueCruise advanced driver-assistance system to Great Britain, Germany and Spain, a first in that country – in addition to the U.S. and Canada. More than 290,000 BlueCruise-equipped Ford and Lincoln vehicles are now on the road, with customer use exceeding 2.3 million hours and 156 million hands-free miles – and counting.
Ford Credit’s full-year earnings before taxes of $1.3 billion were in line with the company’s expectations, though lower than a year ago. Among influences were higher borrowing costs, lower auction values and higher credit losses – all of which were anticipated.
Full-Year 2024 Outlook
Ford Chief Operating Officer Kumar Galhotra said that the company entered 2024 with the talent and structure needed to correct quality and cost issues, contributing to growing fundamental strength and upside.
“We’re seeing green shoots of quality improvement, including in our new-product launches – with several important ones coming up this year,” Galhotra said. “Across our global industrial system we’ve identified and will land $2 billion in cost reductions, in areas like material, freight and manufacturing – and we’re just getting started.”
Ford anticipates full-year adjusted EBIT of $10 billion to $12 billion and to generate $6 billion to
$7 billion in adjusted free cash flow, with capital expenditures of $8 billion to $9.5 billion. The guidance presumes flat to modestly higher full-year U.S. industry volume, with overall lower vehicle pricing. Upsides include beneficial pricing and mix from 12 months of sales of the all-new Super Duty that Ford Pro introduced during 2023.
The company’s total costs are expected to be flat year-over-year, the net of factors including the
$2 billion in industrial cost improvements, offset by higher expenses for labor and major product-refresh actions.
At a segment level, the outlook is for full-year 2024 EBIT of at least $8 billion to $9 billion from Ford Pro and about $7 billion to $7.5 billion from Ford Blue; an EBIT loss of $5.0 billion to $5.5 billion for Ford Model e; and earnings before taxes of about $1.5 billion from Ford Credit.
Ford plans to report first-quarter 2024 financial results on Wednesday, April 24.