Ford Motor Co. (NYSE: F) announced lackluster results for the most recent quarter. Revenue rose 10% to $39.5 billion. Its market share stayed flat at 4.9%. Perhaps that is what Ford considers progress. Ford’s management, unfortunately, guided toward the low end of previous forecasts. Pretax profits will be between $11.5 billion and $12. 5 billion for the year.
The most important news was well down the page in Ford’s press release. This is that its Argo AI autonomous car efforts will be junked. The write-off cost Ford $2.7 billion. Ford repeatedly has said it is enthusiastic about self-propelled cars, or what are known as autonomous vehicles. Management changed its mind at a great cost to investors.
Why did Ford decide to move out of the AI business? It is something one would think it learned earlier. Ford CFO John Lawler said, “It’s become very clear that profitable, fully autonomous vehicles at scale are still a long way off.” That puts Ford out of step with Alphabet’s Waymo, Tesla and Nvidia. Each is part of a remarkably successful company that knows the technology world better than Ford.
Ford has over 40,000 cars parked in lots because of supply chain management, which is a figure it disclosed earlier. It also missed its initial forecasts of expenses for the quarter by a massive $1 billion. One would think one of the largest car companies in the world would have caught the problem earlier.
Ford’s estimates of costs have hurt it elsewhere. It missed its forecast of what components of its popular electric vehicles, the Mustang Mach-E and F-150 Lighting, would cost. Consequently, it raised prices on each of these by several thousand dollars. In a very competitive market, it is a good way to risk erosion in market share.
Ford’s shares have had an unexpected, modest bounce recently. Nevertheless, they are down 38% this year. Some analysts believe that stock is at risk of another downturn because a recession will sap demand for cars and light trucks.
Did Ford abandon self-driving cars too early? If so, it has cost investors a great deal of money already and will cost even more in the future.
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