Why Ford Stock Tanked Friday
Ford (NYSE: F) had been touting the investments it has planned to grow its electric vehicle (EV) segment. But after reporting its third-quarter earnings last night, investors aren't happy with what they heard about Ford's Model e segment.
The report was a mix of good and bad news, but investors are focusing on the negatives today. Shares remained down by roughly 10% as of 12:45 p.m. ET.
Postponing $12 billion in planned spending
Ford launched its Ford+ strategy this year, breaking its operations into three reporting segments. That allows investors to look at results individually among the Ford Blue legacy brands, Ford Pro commercial offerings, and Ford's new EV segment, dubbed Model e. Now investors are seeing losses in that segment growing and that's hurting the stock today.
While the Ford Blue and Ford Pro businesses increased profit margins by double digits year over year, losses in the Model e segment grew, "exacerbated by EV price pressure," according to the company. That is even after EV shipments increased by 44%.
The company now says it will throttle back investments in its EV products and instead look to grow sales of hybrid versions of some of its most popular vehicles. In its conference call with analysts, Ford CFO John Lawler said the company has decided to postpone about $12 billion in planned investments to grow the EV segment.
Not a time to buy
The problem investors are seeing with owning Ford shares today is that its biggest potential growth opportunity is now delayed just as the company also will be seeing increased costs from a new labor contract. The company confirmed earlier this week that it has a tentative agreement with the UAW, and that increased labor costs from that contract will boost per-vehicle costs by several hundred dollars.
While consumers are still buying Ford's legacy products, investors think the bigger opportunity comes from EV sales. Now that Ford is taking a step back on that front, so are investors with the company's stock.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
