Farley 'frustrated' with poor execution as Ford loses $2B in 2022

DETROIT — Ford Motor Co.'s fourth-quarter net income fell to $1.3 billion because of continued supply chain struggles, and CEO Jim Farley blamed the automaker's annual loss on poor execution.

For all of 2022, Ford lost $2 billion, and the company's adjusted earnings before interest and taxes of $10.4 billion was more than a billion lower than what it forecast. Farley promised better results in 2023, which he described as a "pivotal year” for the automaker.

"To say I'm frustrated is an understatement because the year could have been so much more for us at Ford," Farley said on an earnings call with analysts late Thursday. "We have deeply entrenched issues in our industrial system that have proven tough to root out. Candidly, the strength of our products and revenue has masked this dysfunctionality for a long time."

In a statement, Farley said Ford left about $2 billion of profits on the table last year. 

Ford CFO John Lawler said roughly half of those unrealized profits are due to missed volume targets, while the other half is related to costs, noting that Ford needed "better execution and better supply chain management."

Ford’s fourth-quarter net income fell 89 percent from the same period a year earlier, when an investment in Rivian boosted profits significantly.

Ford's fourth-quarter adjusted EBIT rose 25 percent to $2.6 billion. The automaker's adjusted profit margin rose slightly to 5.8 percent while revenue in the quarter grew to $44 billion.

The automaker on Thursday also issued a first-quarter regular dividend of 15 cents per share and a supplemental dividend of 65 cents per share, which it says reflects monetization of its stake in Rivian.

Ford shares fell 6.1 percent to $13.45 in after-hours trading.

The company reported North American earnings of $9.2 billion for the year, which means about 56,000 UAW-represented employees will receive an average profit-sharing check of $9,176. Checks will be distributed in March, Ford said.

General Motors' UAW employees will receive profit-sharing checks that average $12,750.

Ford had previously forecast adjusted EBIT of $11.5 billion for the full year. Lawler said it missed the mark because of lower volumes than expected, semiconductor shortages and other supply chain issues. He said Ford missed volume targets in the fourth quarter by about 100,000 vehicles.

“There are issues in our industrial system ... we're not yet operating as productively or as efficiently as we need to,” Lawler said. “In the simplest terms, we need to improve quality and lower costs now.”

For the full year, Ford made $413 million in South America, $47 million in Europe and $628 million in its International Market Groups. It lost $572 million in China, although it noted that the Lincoln luxury business there is profitable.

For 2023, Ford said it expects to earn between $9 billion and $11 billion. Lawler said that includes a forecast for a "mild recession" in the U.S. and a "moderate recession" in Europe.

Lawler, in a call with journalists Thursday, said the company planned to ramp up cost-cutting efforts. Ford previously said it planned to cut $3 billion in costs by mid-decade, and Lawler said it's now looking at a "considerable amount more than" that, although he declined to provide specifics.

"We're going to be very aggressive," he said.