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By Jonathan Guilford
NEW YORK, April 25 (Reuters Breakingviews) - Detroit’s remake has ended up a little differently than expected. Ford Motor F.N and General Motors’ GM.N combined U.S. sales of electric vehicles haven’t grown since late 2022, despite them investing billions of dollars. Look closer at the first-quarter results they reported this week, though, and their revenue engines are starting to fire, and in helpfully different ways.
True, on the face of it, the shift to electric vehicles doesn’t seem to be doing them any favors. At Ford’s electric Model e segment, operating losses were over 10 times greater than revenue, which slumped. At GM, first-quarter U.S. electric sales are roughly where they were in 2022’s fourth quarter, a paltry 16,425 vehicles versus full-year aspirations of up to 300,000, according to Cox Automotive.
There’s more happening under the hood. GM boss Mary Barra has said electric efforts depend on rolling out the company’s Ultium battery design, giving it greater control over costs. After many stumbles, that’s finally happening. GM’s electric sales of the money-bleeding Chevrolt Bolt are falling as the company ditches the hatchback, with vehicles rising along a promising growth curve. That’s important: GM says these models will finally cover their per-unit costs. At Ford, meanwhile, boss Jim Farley has U-turned faster than his rival on the pursuit of rapid electric-vehicle growth, further cutting back forecast capital expenditure.
It’s good for both companies to stay out of each other’s way. GM’s proliferating lineup hits the high end as well as models competing more directly with Tesla. Ford’s lineup tilts to electric pickups and commercial Transit vans. And that latter part of that formula is going very well: Ford Pro, which sells gas- and battery-powered trucks like the Transit to business and government customers, saw operating profit leap 120% year-over-year. Thanks to software and services that Pro tacks on, its operating margin of 17% is roughly quadruple the profitability of Ford’s main gas-guzzler business. And it’s an electric business that’s growing – electron-slurping Transit sales are up 148% year-over-year, Cox reckons.
There’s little sign the market cares. Ford trades at roughly the same 7 times multiple of earnings it has for a while; GM has slumped to under 5 times, according to LSEG. The comparison to Tesla, at 56 times despite a slew of bad , doesn’t bear making. Yet both companies’ grip on their future is strengthening. After years of misfires, that is worth something.
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CONTEXT NEWS
Ford Motor said on April 24 that it generated revenue of $42.8 billion in the three months to March 31, slightly below analyst expectations tracked by LSEG. The U.S. automaker said that sales slowed partly because of delays related to models of the F-150, its best-selling pickup truck.
Operating profit of $2.8 billion beat estimates by 18%, and the company said free cash flow could be up to $7.5 billion for the year, up from an earlier forecast of $7 billion. It cut its expected capital expenditure slightly.
Rival General Motors the previous day reported better-than-expected profitability in the first quarter, and raised its own full-year forecasts for earnings, operating profit and free cash flow. GM maintained its previous estimate of full-year capital expenditure.
(Editing by John Foley and Sharon Lam)
((For previous columns by the author, Reuters customers can click on GUILFORD/
Jonathan.Guilford@thomsonreuters.com; Reuters Messaging: Jonathan.Guilford.thomsonreuters.com@reuters.))