Ford Motor Company reported a net loss for the third quarter, owing to its decision to shift spending away from the Argo AI self-driving business.
Ford’s decision, which contrasts sharply with rival General Motors Co’s decision to double down on investments in its Cruise robotaxi unit, highlights the pressure on automakers to make difficult decisions as the financial costs of transitioning to electric vehicles rise.
Both US automakers continue to incur significant losses in the development of automated vehicles.
Ford reported a $827 million net loss for the quarter, after taking a $2.7 billion noncash pretax impairment on its investment in Argo AI.
Argo will be “wound down,” according to Ford, and “talented engineers” will be offered positions.
Volkswagen AG, Argo’s other major investor, has also stated that it expects to hire some Argo employees.
Argo stated in a statement that it “will not continue on its mission as a company,” a decision made “in coordination with our shareholders.” It was announced that some Argo employees would be let go.
Ford and Volkswagen each own approximately 39 per cent of Argo, with Lyft Inc owning approximately 2 per cent and the remainder held by Argo’s founders and employees.
On Wednesday, Ford CEO Jim Farley announced that the company’s development focus will shift from fully self-driving systems developed by Argo to advanced driver assistance systems (ADAS) developed internally. These systems are partially automated, but humans must remain engaged when the vehicle is moving.
“Profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” Farley said in a statement.
The automaker reported a 10% increase in third-quarter revenue to $39.4 billion. Adjusted operating profit fell to $1.8 billion from $3.0 billion the previous year, but it exceeded analysts’ consensus of $1.7 billion.
The adjusted operating earnings per share of 30 cents exceeded the 27 cents predicted by analysts.
In mid-September, Ford warned that inflation-related supplier costs were running about $1 billion higher than expected.
GM reported a net profit of $3.3 billion on record third-quarter revenue of $41.9 billion on Tuesday. GM reiterated its full-year net income guidance of $9.6 billion to $11.2 billion.
On the company’s earnings call, GM executives were generally upbeat, but Ford executives were more cautious.
In a press conference on Wednesday, Ford Chief Financial Officer John Lawler stated: “We believe that the United States will enter a mild (or moderate) recession next year. In Europe, we could see a more significant decline.”
Ford expects full-year adjusted earnings before interest and taxes to be around $11.5 billion, up about 15 per cent from last year, but at the low end of its previous guidance range of $11.5 billion to $12.5 billion.
(Adapted from BusinessToday.in)