Ford Motor Company, the iconic American automaker, has navigated through a rapidly evolving industry landscape, showcasing its resilience and adaptability. As the company continues to execute its Ford+ plan, it has demonstrated a steadfast commitment to improving cost competitiveness, enhancing product quality, and diversifying its revenue streams.

Company History and Background

Founded in 1903, Ford has a rich history of innovation and industry leadership. The company was incorporated in Delaware in 1919, acquiring the business of the Michigan-based Ford Motor Company that had been established by Henry Ford. Over the decades, Ford has faced various challenges and milestones, including labor unrest in the 1910s and a significant decline in sales during the Great Depression of the 1930s. Despite these obstacles, Ford emerged stronger, introducing new models like the Ford Deluxe in 1938.

The post-World War II era saw Ford expand internationally, opening manufacturing plants in countries like Canada, the United Kingdom, and Germany. The company also introduced iconic models such as the Thunderbird in 1955 and the Mustang in 1964, which became major sales successes. However, Ford faced quality issues and increased foreign competition in the 1970s, leading to the "Quality Is Job 1" campaign to improve its vehicles.

In the 2000s, Ford encountered significant financial troubles during the Great Recession, resulting in a comprehensive restructuring plan that included facility closures and layoffs. The company managed to avoid bankruptcy by mortgaging its assets to secure financing, allowing it to weather the economic downturn without government assistance unlike its competitors. This period highlighted Ford's resilience and ability to adapt to challenging market conditions.

Current Business Overview

Today, Ford remains a global automotive company based in Dearborn, Michigan, with approximately 171,000 employees worldwide as of 2024. The company's unwavering focus on its core strengths, such as the F-Series pickup truck, Transit vans, and commercial vehicles, has enabled it to maintain a strong market presence. However, the automotive industry is currently grappling with a myriad of challenges, from geopolitical tensions and trade policy uncertainty to the rapid transition towards electrification and emerging technologies.

Ford operates through several distinct business segments, each contributing to the company's overall performance:

Ford Blue Segment: This segment focuses on the sale of Ford and Lincoln internal combustion engine (ICE) and hybrid vehicles, as well as service parts, accessories, and digital services for retail customers. It also provides hardware engineering and manufacturing capabilities to other segments and handles sales of ICE and hybrid vehicles to commercial, government, and rental customers in markets outside the United States and Canada.

Ford Model e Segment: Dedicated to the development and sale of Ford's electric vehicles, this segment also covers related service parts, accessories, and digital services for retail customers. It plays a crucial role in developing EV and digital vehicle technologies, as well as software development.

Ford Pro Segment: This segment caters to commercial, government, and rental customers, offering Ford and Lincoln vehicles, service parts, accessories, and services. It includes the sale of ICE, hybrid, and electric vehicles, along with digital and physical services to optimize and maintain fleets.

Ford Next Segment: Focused on emerging business initiatives, this segment aims to create value for Ford in vehicle-adjacent market segments.

Ford Credit Segment: This segment handles the company's vehicle-related financing and leasing activities on a consolidated basis.

Financials

In 2024, Ford's global revenue reached a record $185 billion, representing a 5% increase from the previous year. This impressive top-line growth was driven by the company's strategic decision to offer customers a diverse portfolio of products, catering to both retail and commercial segments. The F-Series, once again America's best-selling pickup truck, and the Ranger, a growing global franchise, have been instrumental in Ford's success.

Breaking down the performance by segment:

Ford Blue reported revenue of $101.94 billion and EBIT of $5.28 billion in 2024. While revenue remained flat due to the discontinuation of low-margin products, the segment's EBIT margin of 5.2% demonstrates the company's ability to maintain profitability in its traditional business.

Ford Model e generated revenue of $3.85 billion and EBIT of $5.08 billion. This segment has faced challenges due to industry-wide pricing pressure and the need for substantial investments in new battery plants and next-generation products. To mitigate these headwinds, Ford Model e implemented extensive cost-cutting measures, achieving $1.4 billion in net reductions during the previous year.

Ford Pro was a standout performer, delivering $66.91 billion in revenue and $9.02 billion in EBIT with a 13.5% margin. The company's focus on unit sales, mix optimization, and the expansion of its software and physical services business have contributed to Ford Pro's strong performance.

The Ford Credit segment reported EBT of $1.65 billion, showcasing the strength of Ford's financing arm.

Amidst these dynamics, Ford has remained focused on its cost optimization journey, targeting at least $1 billion in net cost reductions for 2025. The company's efforts to enhance quality, streamline operations, and leverage data analytics and AI have started to yield tangible results, with the second half of 2024 seeing approximately $500 million in net cost savings.

Liquidity

Ford's financial position remains strong, with $28.5 billion in cash and $46.7 billion in liquidity as of December 31, 2024. The company's adjusted free cash flow of $6.7 billion in 2024 and a commitment to returning 40-50% of free cash flow to shareholders through dividends and share repurchases underscore its disciplined capital allocation.

Future Outlook

Looking ahead, Ford's guidance for 2025 reflects the industry's challenges, with an adjusted EBIT range of $7 billion to $8.5 billion. The company's outlook assumes headwinds related to lower industry pricing, partially offset by cost reduction initiatives and the launch of new products. Ford's success in navigating these headwinds will depend on its ability to maintain pricing discipline, continue its cost optimization efforts, and capitalize on the growth opportunities presented by the evolving industry landscape.

For 2025, Ford provides the following segment-specific guidance:

• Ford Pro is expected to deliver EBIT of $7.5 billion to $8 billion

• Ford Model e is expected to have a loss of $5 billion to $5.5 billion
• Ford Blue is expected to have EBIT of $3.5 billion to $4 billion
• Ford Credit is expected to have EBT of about $2 billion

The company anticipates adjusted free cash flow of $3.5 billion to $4.5 billion in 2025, with capital expenditures projected to be $8 billion to $9 billion. For the first quarter of 2025, Ford expects adjusted EBIT to be roughly breakeven, primarily due to a reduction in wholesales and unfavorable mix.

It's worth noting that this guidance does not factor in potential impacts from changes in policy by the current administration, such as new tariffs or changes to tax credits and emissions policies.

Despite the uncertainties and complexities facing the automotive industry, Ford's unwavering focus on its core strengths, its commitment to operational excellence, and its strategic investments in new technologies position the company for long-term success. As the company navigates these turbulent times, investors will keenly watch Ford's ability to adapt, innovate, and deliver sustainable growth across its diverse business segments.