Ford’s Profit Rises on Higher Sales, More Inventory

Ford-Motor Co.

F 5.18%

‘s net income rose nearly 19% in the second quarter, benefiting from rebounding sales and pent-up demand from car shoppers who have had to wait on purchases due to dealerships being out of stock.

The Dearborn, Mich., auto maker said Wednesday that revenue jumped 50% to $40.2 billion in the April-to-June period, driven in large part from having more vehicles to sell and buyers willing to pay elevated prices for them with inventories still constrained .

Second-quarter net income totaled $667 million, compared with $561 million in the same year-ago quarter, when Ford was still recovering from hefty production losses related to parts shortages and a factory fire at a microchip maker in Japan. The net results include a $2.4 billion mark-to-market loss on Ford’s stake in electric-truck startup Rivian Automotive Inc.

Ford’s pretax profit, adjusted for one-time items, more than tripled to $3.7 billion for the quarter, or 68 cents a share. The results handily beat analysts’ expectations of 45 cents a share, according to FactSet.

“We have really strong order banks continuing, significant pent up demand, and our products are actually selling as quickly as we can produce them,” Ford Chief Financial Officer John Lawler said Wednesday.

The car company’s stock was up about 5% in aftermarket trading Wednesday after the earning report’s release. Ford shares have fallen 38% since the start of the year.

Ford Chief Executive Jim Farley has spent much of this year restructuring the business, aiming to better prepare the more than century-old auto maker for a long-range transition to electric vehicles.

As part of this effort, Ford is expected to disclose in the coming weeks a plan to eliminate more than 4,000 white-collar workers, The Wall Street Journal reported last week.

Mr. Lawler declined to comment when asked about the timing and number of job cuts. He said Ford is modernizing its business to take out unnecessary costs. “At the same time, we’re going to strategically invest in all of our auto businesses,” he added.

Mr. Farley said later in a call with analysts that the company has too many employees and is looking to trim costs in its gas-engine division.

The belt-tightening move follows an effort to reorganize its internal operations into separate divisions, creating one for its conventional gas-engine business and another focused on developing electric vehicles and software.

Mr. Farley has said he wants to boost pretax profit margins to 10% by 2026, a target he hopes to achieve by cutting $3 billion in annual structural costs.

Ford on Wednesday confirmed its pretax profit outlook for 2022 of $11.5 billion to $12.5 billion, a figure that represents a 15% to 25% increase over 2021. Mr. Lawler said he expects commodity costs, which have been rising in recent quarters, to moderate in the second half of the year and sales to remain strong as the company fills a backlog of consumer orders.

Like other auto makers, Ford continues to confront a litany of supply-chain challenges, particularly with securing enough semiconductors to keep its assembly lines running. Factory shutdowns in China related to a surge in Covid-19 infections has more dented earnings for other auto makers this year.

The specter of an economic downturn is also looming over the car business with higher prices and inflationary pressures leading Americans to pullback spending on other goods.

Earlier this week, General Motors Co.

executives said they were taking steps to prepare for a recession, including curtailing hiring, after reporting a 40% drop in its second-quarter net income. GM reaffirmed its 2022 guidance, saying the second half will be stronger as supply constraints ease.

Global auto-making giant Stellantis NV, which owns Jeep, Ram and other automotive brands, reports its half-year results Thursday.

At the same time, the multiyear inventory crunch on dealership lots is leading car shoppers to pay top dollar for vehicles that are available, pushing profits higher for both car manufacturers and dealers.

Auto executives are generally bullish that even as consumers cut spending elsewhere, demand for cars and trucks will remain resilient because of a backlog of orders and pent-up demand.

Ford, which this spring began selling an all-electric version of its popular F-150 pickup, reported a 32% increase in US sales in June. Its US sales for the first half of the year also performed better than the broader market, decreasing 8% compared with an 18% decline for the industry overall.

Still, Ford started the year reporting a $3.1 billion net loss, red ink largely driven by a devaluation of its stake in Rivian,

whose stock has tumbled nearly 70% this year.

Ford is moving to add more electric vehicles to its lineup, building on early momentum with models like the Mustang Mach-E SUV. It aims to produce 2 million electric vehicles globally by 2026, and last week said it had secured about 70% of the battery capacity needed to reach the goal.

The auto maker also said it had signed a deal with China’s Contemporary Amperex Technology Co.

to supply batteries to models in North America and is switching to new chemistries to curb reliance on sought-after metals such as nickel.

Write to Nora Eckert at

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