Ford’s Cash Distribution and EV Strategy
Ford’s Generous Return to Shareholders
Ford Motor shares surged as the company announced plans to boost returns to shareholders, starting with a generous extra dividend of 18 cents per share in the first quarter. This move aligns Ford with General Motors in sharing the wealth generated by North American combustion trucks with investors.
Ford’s Profit Forecast
Ford forecasts a pretax profit of $10 billion to $12 billion for 2024, following last year’s $10.4 billion before taxes. The company’s Pro commercial vehicle business and Ford Blue combustion vehicle units offset significant losses from their Model E electric vehicle operations.
Shift in EV Strategy
Ford is scaling back its investment in new EV capacity to match the slower demand that followed a seismic change in EV pricing over the past year. Executives revealed that the next generation of Ford EVs will only be launched when they can deliver profitability.
Focus on Cash Flow
Ford anticipates a projected free cash flow of $6 billion to $7 billion this year, with a commitment to return 40% to 50% of that cash flow to investors. The company also plans to provide a supplemental dividend whenever the regular dividend falls short of this range.
Challenges in EV Operations
While Ford’s electric vehicle operations continue to be a cash drain, with Model E vehicles averaging a loss of over $47,000 per vehicle in the fourth quarter, the company projects a wider pretax loss of $5 billion to $5.5 billion for this year.
Revised EV Strategy
Ford is overhauling its EV strategy in response to slower mainstream consumer adoption and the price war initiated by Tesla. The company plans to invest more in larger EVs such as trucks and vans, while also prioritizing gas-electric hybrids that command higher profit margins than EVs.
Key Drivers of Profit
Ford’s Ford Pro commercial business is expected to be a key driver of profit and potential cash returns to investors this year, with forecasts of $8 billion to $9 billion in pretax profit compared to $7.2 billion last year. Additionally, increased sales of redesigned Super Duty pickup trucks in North America are expected to contribute to higher Ford Pro profits.
