NEW YORK: Ford Motor Co has raised its profit outlook for the second time this year as consumers continue to snap up the automaker’s high-margin sport utility vehicles (SUVs).
The rosier forecast showed how Ford is cashing in on resilient demand for SUVs and pickups, echoing a similar move by rival General Motors Co last week.
Those models generate critical profits for Ford as the company scales back its loss-making electric vehicle (EV) operations and digests higher costs from tariffs and commodities.
It’s also a sign of momentum as Ford invested US$2bil into a new energy storage business that could take years to generate returns.
Ford said it plans to reach 20 gigawatt hours of capacity at the energy unit by the end of next year.
Chief executive officer Jim Farley said the company has the potential to expand beyond that.
“This will position Ford Energy among the leading energy storage manufacturers in North America,” Farley said on a conference call with analysts.
Ford’s shares rose 5.2% in after-hours trading in New York. The stock gained 14% this year through Tuesday’s close, better than the broader S&P 500 Index.
The automaker softened the blow of a 10% drop in US vehicle sales in the second quarter by delivering large numbers of profitable Bronco and Explorer SUVs, particularly high-margin models outfitted with expensive off-road performance packages.
Mainstream US automakers have dialled up production of petrol-guzzling SUVs and pickups to capitalise on the Trump administration’s moves to slash federal fuel efficiency requirements and other policies pushing adoption of EVs.
Freed from those regulatory constraints, strong SUV sales helped Ford offset a hit to profit from having fewer of its top-selling F-Series pickups on hand due to fires last year at the Novelis Inc aluminium mill in New York state that provides material for the truck’s body panels.
The mill resumed operations in the second quarter and Ford expects to recoup some lost production in the back half of the year.
The company anticipates recovering about US$2.5bil worth of F-Series production lost to the fires, the low end of its previous forecast for as much as US$3bil, according to an investor presentation.
Chief financial officer Sherry House said much of the more than US$1bil in tariff costs Ford expects this year comes from importing aluminium because of the Novelis fires.
“We have a very sizeable tariff cost due to the Novelis supply disruption and our need to be able to secure aluminium from outside the United States,” House said in a call with reporters on Tuesday.
“Our tariff costs now are largely focused on aluminium and steel and incoming vehicles.”
Adjusted earnings were 42 US cents a share in the second quarter, topping the 36-cent average of analyst estimates compiled by Bloomberg.
Ford now expects to earn as much as US$11bil before interest and taxes this year, up from its prior forecast for US$8.5bil to US$10.5bil, the company said in a statement on Tuesday.
Analysts had expected about US$9.5bil on average.
RBC Capital Markets analyst Tom Narayan said the higher forecast suggested Wall Street’s estimates for Ford’s second half results could move higher.
Ford’s foray into energy storage sent its shares soaring the most in 17 years in May as investors tied the old economy automaker to the artificial intelligence spending boom.
Profits from the new energy business won’t show up in financial results until 2028, House told reporters.
On the analyst call, Farley didn’t directly address whether Ford is signing energy storage deals with hyperscalers, saying that the company is reaching out to a variety of potential customers for its new unit.
The move into the battery business came from Ford’s setback in attempting to sell EVs, as it repurposes an EV-battery plant in Kentucky to build batteries for energy storage.
That facility was part of Ford’s now-defunct joint venture with South Korea’s SK On to build EV batteries.
Ford booked a US$3.6bil largely non-cash charge in the second quarter related to the previously disclosed wind-down.
Ford’s EV sales plunged 41% in the second quarter, after discontinuing its F-150 Lightning plug-in pickup as part of US$19.5bil in charges on underperforming EV assets.
Ford is overhauling its EV strategy to focus on less expensive models, starting with a US$30,000 small electric pickup truck due to launch later next year.
Farley has promised several affordable electric models to be built on what the company called its universal EV platform, which are to be produced at a former SUV factory in Kentucky.
He has said those models are critical to fending off competition from Chinese automakers that are gaining ground worldwide with cheap, high-tech EVs, but are currently kept out of the US market by formidable trade barriers.
Farley has praised Chinese automakers’ cost and technological advantages, saying they represent an existential threat to western car companies.
Last week, Ford announced a joint venture with China’s Geely Automobile Holdings Ltd to co-develop electric SUVs for Europe and to share production at a Ford factory in Spain.
Ford also has a licensing agreement with Chinese battery giant Contemporary Amperex Technology Co Ltd, to build batteries for both EVs and energy storage. — Bloomberg
