Jim Farley is gearing up for the next generation of electric vehicles.
The Ford (F) CEO made his case to analysts on Feb. 6 during the automaker’s fourth-quarter earnings call. He discussed plans for making an affordable electric vehicle to compete with Tesla (TSLA) and Chinese automakers.
“Last year turned out to be a fundamental year — a foundational year for our company,” Farley said, according to a transcript of the call.
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Indeed. That year, the auto industry was buffeted by a six-week United Auto Workers strike that reportedly drained about $1.7 billion from Ford’s bottom line.
Then, there was a slowdown in electric vehicle sales, causing automakers to curtail or scrub their EV production plans.
Last month, Ford announced it would shut down one of two production shifts in April at the Dearborn, Mich., factory that builds the F-150 Lightning electric pickup, citing lower demand for the pickup truck even as Tesla launched its Cybertruck.
Ford said that for 2024, it expects losses for its EV division, ‘Model e’, to widen to $5 billion to $5.5 billion because of pricing pressure and investments in next-generation vehicles.
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Marin Gjaja, chief operating officer for ‘Model e’, stressed the importance of “sticking to the capital discipline and the operating discipline around launching Gen 2 only when they can be profitable and deliver the kind of returns we want.”
And “over time, that will build a stand-alone profitable EV business,” he said.
Analysts reacted favorably to what they heard from the automaker, particularly about Ford Pro, the commercial vehicle division.
“We don’t just lead in Pro, we dominate,” Farley said. “Ford Pro is really a magical breakthrough for our customers and our company, and, I believe, the industry.”
Analysts at Citibank, noting the company’s encouraging 2024 guidance, boosted their price target on Ford to $16 from $15 while affirming a buy rating on the shares.
The analysts said Ford’s outlook highlights some of the story’s underappreciated aspects, such as the Pro franchise, product cycle, and resilient U.S. auto demand.
Citi said it expected a favorable reaction as consensus estimates, which will likely rise as confidence around Ford’s execution grows.
They aren’t the only ones impressed.
Bank of America analysts raised their price target on Ford to $21 from $19, reiterating a buy rating on the shares because of solid execution and stronger-than-expected prices, especially in Ford Pro.
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