Ford Motor ( F ) CEO Jim Farley said the automaker’s poor performance in the fourth quarter was a function of the transition to a new business structure that limited production capacity, combined with poor execution. But we remain disappointed in the results and should see an increase in profitability to stick with the stock after the next quarter. In an interview with CNBC that aired Friday, Farley said he is in the midst of restructuring Ford to do business more efficiently but has faced challenges in streamlining processes at the auto giant, which also held back profits in the last quarter. “It’s a lot to change. We have a lot of complexity relative to the customer and inside our company. It takes time to work through that,” Farley said. Ford late Thursday reported adjusted earnings-per-share (EPS) below analysts’ forecasts, beating record revenue. The company’s full-year EPS guidance was also weaker than expected, sending the stock lower on Friday. Shares closed down more than 7.5% in afternoon trading, at $13.23 apiece. The earnings miss comes a day after Ford said it is cutting the prices of its electric Mustang Mach-E crossover, while raising production, a week after EV industry leader Tesla (TSLA) made the same move. The price cut means that not all Mach-E models will be profitable per unit. Last year, Ford announced the separation of electric vehicles (EVs) and internal combustion engine vehicles into separate business units, called Ford Model e and Ford Blue. But profit has not been able to achieve restructuring. Farley told CNBC that the automaker will have to deal with higher-than-expected costs, semiconductor chip shortages and supply chains to improve profitability in its EV division. “It takes a simple effort to get to the 8% margin we’re looking for,” he said. However, he added, management still needs to rethink how to produce and distribute EVs in a cheaper way. The club took “It’s inexcusable that Ford had a bad quarter,” Jim Cramer said on Friday. “We will boot the stock if this quarter is not good,” he added. It is positive that Farley has recognized the need for more supply-chain efficiency, increased production, improved cost structure and better execution – but we have to see the results. Now we stay with Ford but it’s in the penalty box, which means management has another quarter to finish. If we don’t see improvement in the next quarterly report, we have no choice but to move on. (Jim Cramer’s Charitable Trust is long F. Read here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you will receive trade alerts before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing a trade alert before executing a trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO THE TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH THE DISCLAIMER. No fiduciary obligation or duty is, or is created, based on the receipt of the information provided in connection with the investment club. No special results or profits are guaranteed.
Ford CEO Jim Farley at the factory in Dearborn, Michigan, where he builds the electric F-150 Lightning on April 26, 2022.
CNBC Michael Wayland
Ford Motor District (F) CEO Jim Farley said the automakers’ fourth quarter is a function of the transition to a new business structure that has limited production capacity, combined with poor execution. But we remain disappointed in the results and should see an increase in profitability to stick with the stock after the next quarter.